Reply to DC: Hiring a financial professional to do a Roth conversion analysis

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Unless you have
Over $10m in pre tax accounts it doesn’t make sense to do a Roth conversion. Your RMDs will never push you into the highest bracket. 
If you want to use Roth accounts as inheritance vehicles just convert a moderate amount each year or even a sizable amount in a low income year. Just make sure you have the money to cover the taxes. [/quote]

This is incorrect. We have combined 2.5M in pre tax accounts. If we do nothing, our RMDs would knock us into top tax bracket. We’re retiring early to start Roth conversions.

Validated with Projections Lab software and a CFP. [/quote]

Interesting because we have more than that (and some other income) and our projections don’t show us in the top bracket. Could be you also have other income or else the difference is some combination of what returns you are projecting and how much you plan to spend.

An interesting question I could try to figure out is what is the future rate of return where a Roth conversion would turn out to make sense but it’s enough for me to know the answer falls in a range of uncertainty, especially because I’d rather pay more taxes when returns are better than expected vs when they are worse than expected. [/quote]

We’re mid 50s and our pretax accounts currently total almost 3M. If we did nothing but let the money grow (we assumed 6%), at 75 our first RMDs would put us a shade into top tax bracket. We’d rather start conversions now (filling 22% bracket) and not get RMDs taxed at up to 37%. For us it’s not really about returns but minimizing taxes. Our thought is that the tax brackets are low and they might go up later. Ideally we’d get all our investments into a Roth for tax savings as well as being easy for our heirs. From what we’ve projected, we will have plenty of yearly spending and our portfolio will still grow. [/quote]

Interesting. If that 6% is real then it’s higher than what we used (since we have a bunch of bonds in tax deferred) but also the tentative plan is to draw the tax-deferred down first so within maybe 10 years the drawdowns exceed the increases. [/quote]

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