Ira to Roth or not.

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
hulburt1
Posts: 510
Joined: Tue Jul 15, 2014 9:17 pm

Ira to Roth or not.

Post by hulburt1 »

I'm 68 single with 1.1m Ira and 220000 Roth. I can easily live at 12%. But once SS kicks in and RMD at 72 I will be at top 22%. I live very nice at 25000 a year. Running all my no. (10000 pension, RMD 40000, SS 26000 and a part time job 10000) My job go's right to state and Fed. tax's. But I do not pay tax on my Ira with draws or what I put in Roth that's tax is covered by my job. Should I stay at 12% or run it up to about $80000 and put more In Roth and Take home more. Thanks :confused Would it be stupid to put 1.1m all in MM fund and just live off of that? (44 years) or to 112 years old before I run out of money. My Roth would be in stock and not touched.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Ira to Roth or not.

Post by FiveK »

Taking your numbers as given, before SS and RMDs start the marginal rate picture for your Roth conversions is here:
Image
Including a brief phase-out of the earned income credit, converting up to the top of the 12% bracket costs you ~12%.

Beyond that, IRMAA kicks in if you want to convert enough to bring your tIRA balance down (depending on what return rate you assume). You could pay 22% up to the first IRMAA tier, or ~24% if you include all the money within the 22% bracket.
Image

Once the $26K SS benefit kicks in, you'll pay at least 24% on the RMD (assuming a minimum $40K RMD), and more than that on higher withdrawals.
Image

In short, converting now to the top of the 12% bracket seems a "go do". Beyond that it's close to six of one or a half dozen of the other. With a reasonably sharp pencil, you could justify converting now up to (but not including) the second IRMAA tier.

With a very sharp pencil, assuming you have cash on hand to pay the conversion tax, and depending on what you assume about tax drag in a taxable account, you could justify converting even higher amounts.

Or you could justify not converting beyond the top of the 12% bracket. Depends on your assumptions.... ;)

See the personal finance toolbox if you don't mind using Excel to replicate the charts above.
User avatar
David Jay
Posts: 14586
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Ira to Roth or not.

Post by David Jay »

hulburt1 wrote: Fri Jun 18, 2021 4:33 pmBut once SS kicks in and RMD at 72 I will be at top 22%.
By current law, 22% bracket is scheduled to revert to 25% for the 2026 tax year, so anything you convert in the 22% tax bracket in the next 4 1/2 years will cost less in taxes than withdrawing it beginning in 2026.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
hulburt1
Posts: 510
Joined: Tue Jul 15, 2014 9:17 pm

What to do with 10000 in IRA home Roth leave

Post by hulburt1 »

[Thread merged into here --admin LadyGeek]

I'm 68. 1.1 in Ira with 250000 in MM. Also have 240000 In Roth. I start SS at 70.
I have paid tax's from my Part time job to cover all my with draws from Ira. I can cover another $10000 would you bring home, Move to Roth or leave it alone. I live on 2000 a month. At 12% now but might go to 22% and take some more out of IRA. Single everyone can keep of them self in family.
At 72 will be
pension 10000
RMD 40000
SS 26000
Part time job 10000
User avatar
LadyGeek
Site Admin
Posts: 95686
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Ira to Roth or not.

Post by LadyGeek »

hulburt1 - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. If you have any questions, ask them here.

(Thanks to the member who reported the post and provided a link to this thread.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Post Reply