Traditional to Roth IRA conversion pending legislation

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ifish100
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Joined: Thu Jun 04, 2015 5:23 pm

Traditional to Roth IRA conversion pending legislation

Post by ifish100 »

We currently have about 690K in Traditional IRAs between DW and I. We contribute the non-deductible max amount each year to it because our income prohibits Roth. I have not historically done the conversion because I planned to do the conversion after I retired when I expect our income to drop from around $348K to about $75K, thus a lower tax bracket. I have been missing the Backdoor Roth opportunity because of this pot of Traditional IRA money.

Right now we are 100% bonds in these accounts. Our gains is about 40K, which would result in about a 12K tax burden, this is 31%. We are 61 now and will retire in about 4 years.

I have watched a little bit about the pending legislation regarding eliminating the Mega back door Roth. It appears also that even the backdoor Roth may be in jeopardy for those making over $450K for couples, we would never be over $450K so hopefully we could do the back door Roth from now until 2031.

Questions:
1) Would you guys recommend going ahead and converting the Traditional IRA over to Roth now and paying the 12K in tax or will I be able to do that up until 2031 as long as my income is < 450K?
2) My plan was to limit my income when I retire at 65 and do Roth conversions of my 401K over that 5 year period, I will always have income < $450K in those years too. Hopefully this legislation will not interfere with those plans=?
muffins14
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Re: Traditional to Roth IRA conversion pending legislation

Post by muffins14 »

Do you have a 401k plan at work?

The better path may have been to move your pre-tax IRA funds into your 401k, so that you could have done the non-deductible contribution and then immediate Roth conversion rather than piling up non-deductible dollars in your IRA.

Perhaps even now you can move the funds into a 401k, and then convert the post-tax portion afterwards?
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LadyGeek
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Re: Traditional to Roth IRA conversion pending legislation

Post by LadyGeek »

This thread has run its course and is locked. Speculation about future legislation is prohibited by forum policy, see: Unacceptable Topics
Politics and Religion

In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
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This forum is focused on investing that is directly actionable to personal investors. We don't hold debates on conjecture.

The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.

The best approach is to make your decision about current law. When the law changes, make your decision at that time.

The idea is that members are making decisions that affect their life's savings. Acting on informal information (what you see in the news) that may later be shown to be incorrect will jeopardize your retirement. It's not worth the risk.

Further discussion is in this locked thread: Locked and merged threads on proposed budget, Roth, etc.
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