How do i calculate how much ROTH conversion I need

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kalrocmk
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How do i calculate how much ROTH conversion I need

Post by kalrocmk »

This forum has been a godsend for me. I appreciate all that I have learnt here and the advice that I have received in the past. I am very close to retirement and want to figure out how to evaluate how much ROTH conversions I need to do.

Background: I will be 65 in April, my wife will be 58 in March. We have about $2.3M in our 401 (k)s and IRAs - 1.4 in mine, $900K in hers. We are both planning to retire in April. My COLAd pension will be $50k/year. I intend to start my SS estimated at $48K/year at age 70. She will start her pension ($15K) and SS ($22k) at age 62. We will have federal government employee health insurance in retirement and will not need to take Medicare part B. We also will have about $20K a year in dividends/LTCG from our taxable brokerage accounts. Our expenses are currently $100K/year not including income taxes.

My plan is to do ROTH conversions to top of 22% tax bracket, but am worried that it might not be enough. How do I calculate the optimal amount to convert? is there a simple calculator that I can use? The scenario I would like to plan for would be that one of us passes away in 10 years.

:sharebeer
Just trying to make a living
brawlrats
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Re: How do i calculate how much ROTH conversion I need

Post by brawlrats »

Roth is a person's last name, not an acronym. It doesn't need to be and shouldn't be fully capitalized.
smitcat
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Re: How do i calculate how much ROTH conversion I need

Post by smitcat »

kalrocmk wrote: Fri Jan 28, 2022 10:02 am This forum has been a godsend for me. I appreciate all that I have learnt here and the advice that I have received in the past. I am very close to retirement and want to figure out how to evaluate how much ROTH conversions I need to do.

Background: I will be 65 in April, my wife will be 58 in March. We have about $2.3M in our 401 (k)s and IRAs - 1.4 in mine, $900K in hers. We are both planning to retire in April. My COLAd pension will be $50k/year. I intend to start my SS estimated at $48K/year at age 70. She will start her pension ($15K) and SS ($22k) at age 62. We will have federal government employee health insurance in retirement and will not need to take Medicare part B. We also will have about $20K a year in dividends/LTCG from our taxable brokerage accounts. Our expenses are currently $100K/year not including income taxes.

My plan is to do ROTH conversions to top of 22% tax bracket, but am worried that it might not be enough. How do I calculate the optimal amount to convert? is there a simple calculator that I can use? The scenario I would like to plan for would be that one of us passes away in 10 years.

:sharebeer
Congratulations on a great retirement ... a few questions might help with potential best guess solutions.
- how aggressive are your investments in the retirement accounts or how are you modeling future performance there?
- will your pensions begin at retirement?
- your pensions plus LTGC represent much of your projected expenses even before SS, what are your goals for your funds long term?
- if you have goals for your heirs what are their projected future tax brackets?
- if you have goals for charities what are your projected amounts and timing?

FWIW - we have found no 'simple' calculators.
There are some very good not so simple calculators such as RPM and Pralana gold that can provide some great feedback with reasonable invested time.
HomeStretch
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Re: How do i calculate how much ROTH conversion I need

Post by HomeStretch »

This is investor specific and I haven’t found a simple calculator so if you are up to creating a spreadsheet:

1. Create a spreadsheet that projects your retirement income/expenses/taxes by year starting with your year of retirement through age 85. Be sure to include your SS benefits (which are included in AGI at 0-85%), taxable pension income, RMDs starting at age 72 and any other taxable distributions you will need for cash flow purposes. Don’t forget Federal income tax rates are scheduled to revert back to 2017 rates.

Calculate your marginal tax rates for Federal and state for each year. Also calculate whether you will be subject to additional “tax” in the form of NIIT or Medicare IRMAA.

2. Copy this spreadsheet and add in your planned Roth conversions and calculate the composite Federal rate (which includes NIIT and IRMAA, if applicable) and state rate.

Is your marginal tax rate by year consistent? Or even with Roth conversions does your rate move up into another bracket due to SS or RMDs? Or trigger IRMAA in certain years.

This spreadsheet exercise will at least give you an idea if converting to the top of the 22/25% bracket is “good enough” or if you need to do a deeper dive to determine if more aggressive Roth conversions are needed as a couple. The deeper dive will look at a lot more factors - should you adjust the timing of claiming SS benefits, will you move to a state with less/more taxes or that taxes retirement income differently, gifting/donating now v. later, etc.

You can then use a similar spreadsheet exercise to do a surviving spouse analysis.

If you believe RMDS may be a “tax torpedo”, you may be able to make some changes now that help reduce the impact:
1) put your portfolio fixed income allocation in your tax deferred accounts to slow the growth and, in turn, reduce future RMDs
2) shift from traditional to Roth contributions if available and if feasible with your current marginal tax rate(s).
3) Etc.
GAAP
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Re: How do i calculate how much ROTH conversion I need

Post by GAAP »

Another tool is https://i-orp.com/Plans/index.html, in the extended mode. If your situation is simple enough, it may be sufficient.

However, I would echo the DIY mode with a spreadsheet to get the most confidence in the answers. By the time you build it to really reflect your circumstances, you will have also built much more confidence in the results.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
Silk McCue
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Re: How do i calculate how much ROTH conversion I need

Post by Silk McCue »

10000 ft view based on what you shared Roth conversions are very likely appropriate. The 22% bracket isn’t going to make a significant dent but then 24% will get much more converted for you. Medicare IRMAA will come into play of course and is just a part of the analysis. The TCJA expires at the end of 2025 so you have 4 years to take advantage of these lower rates.

Mark Zoril at planvisionmn.com is a dirt cheap quality option. Less than $200 for the first year and $8 a month after that. He uses eMoney and can readily run Roth conversions scenarios for you. He has done a couple of zoom presentations for local Boglehead chapters. I believe that this would be the fastest and least expensive path to some serious number crunching analysis.

Cheers
Last edited by Silk McCue on Fri Jan 28, 2022 12:24 pm, edited 1 time in total.
ChrisC
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Re: How do i calculate how much ROTH conversion I need

Post by ChrisC »

IRMAA is not an issue for the OP as he and his wife will continue on FEHB insurance and not enroll in Medicare Part B.
Silk McCue
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Re: How do i calculate how much ROTH conversion I need

Post by Silk McCue »

ChrisC wrote: Fri Jan 28, 2022 12:11 pm IRMAA is not an issue for the OP as he and his wife will continue on FEHB insurance and not enroll in Medicare Part B.
Thanks for the catch. I read that and immediately forgot it when I posted. That is excellent for them.

Cheers
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kalrocmk
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Re: How do i calculate how much ROTH conversion I need

Post by kalrocmk »

Thanks to everyone for your help. I will try to do a spreadsheet and also check out planvision and I-orp.
Just trying to make a living
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celia
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Re: How do i calculate how much ROTH conversion I need

Post by celia »

My suggestion is to start with the “big picture” to help you understand the issues you will face. Read this thread and follow the links I offer there, then return to continue reading more of the thread.

celia
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
HomeStretch
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Re: How do i calculate how much ROTH conversion I need

Post by HomeStretch »

ChrisC wrote: Fri Jan 28, 2022 12:11 pm IRMAA is not an issue for the OP as he and his wife will continue on FEHB insurance and not enroll in Medicare Part B.
I’m not familiar with FEHB and RX coverage. OP said they will not utilize Part B didn’t say whether they will utilize Part D (which is subject to IRMAA).
ChrisC
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Re: How do i calculate how much ROTH conversion I need

Post by ChrisC »

HomeStretch wrote: Fri Jan 28, 2022 6:00 pm
ChrisC wrote: Fri Jan 28, 2022 12:11 pm IRMAA is not an issue for the OP as he and his wife will continue on FEHB insurance and not enroll in Medicare Part B.
I’m not familiar with FEHB and RX coverage. OP said they will not utilize Part B didn’t say whether they will utilize Part D (which is subject to IRMAA).
You don’t need Part D since virtually every traditional FEHB health insurance plan has good drug coverage. I have GEHA standard coverage under the FEHB and it broadly covers all of our drug needs. My BIL has BCBS-Basic and it likewise has good coverage. Many Feds don’t enroll in Part B or D as the FEHB plans they had while working had good coverage then and carry forward in retirement.
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Peter Foley
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Re: How do i calculate how much ROTH conversion I need

Post by Peter Foley »

I created a tax planning spreadsheet based on the Turbo Tax "2 Year Comparison" output form. Setting one up based on this template and then projecting out for 5 years is not particularly difficult. As mentioned, I-orp can give you some starting points for modeling purposes.

If is often recommended that one do larger amounts earlier, giving those converted dollars more time to grow in what is likely an equity center Roth account.
tibbitts
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Re: How do i calculate how much ROTH conversion I need

Post by tibbitts »

kalrocmk wrote: Fri Jan 28, 2022 10:02 am How do I calculate the optimal amount to convert? is there a simple calculator that I can use? The scenario I would like to plan for would be that one of us passes away in 10 years.
You'll never find the optimal amount because your assumptions will never be completely correct. I would just look at RMDs based on your assumed rates of return and do conversions to the extent you feel you need to in order to get RMDs to a manageable level, and probably prevent them from growing further based on your average return assumptions. For my own situation I front-loaded conversions, which of course only works out if you get steady positive investment returns, so ultimately what's best will depend on luck.
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retiredjg
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Re: How do i calculate how much ROTH conversion I need

Post by retiredjg »

If you don't plan to use Medicare, the next "limit" I know of is the NIIT which will start at $250k for you. That would be in the middle of the 24% bracket.

Should you bust right through that and convert more? Maybe. It will increase the tax on that $20k a year but to me an extra 3.8% on only $20k is not a lot to pay if you get something you want.

I don't think just to the top of the 22% bracket is going to do enough for you. I'd suggest looking at this model - going to the top of the 24% bracket ($340kish taxable income) for 2022 - 2025 when tax rates revert to higher levels and continuing that would be in the 28% bracket. Then re-evaluate and convert up to the top of the (then 25%) bracket each year. This idea is based on the assumption that you won't be in a bracket lower than 25% during most of your retirement.

Converting up to the top of the current 24% bracket might get your tax-deferred balance low enough to be less of a problem in your 70's.

What you have not mentioned is what you plan to do with your money when you are gone. If your money will go to charity, the plan might be different.

I am not very familiar with the NITT and not sure how real estate fits in. Could selling a home, if that is in your retirement future, be included? I don't know.
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Peter Foley
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Re: How do i calculate how much ROTH conversion I need

Post by Peter Foley »

retiredjg wrote
I don't think just to the top of the 22% bracket is going to do enough for you. I'd suggest looking at this model - going to the top of the 24% bracket ($340kish taxable income) for 2022 - 2025 when tax rates revert to higher levels and continuing that would be in the 28% bracket. Then re-evaluate and convert up to the top of the (then 25%) bracket each year. This idea is based on the assumption that you won't be in a bracket lower than 25% during most of your retirement.
This was my initial reaction, although I did not express it as clearly as retiredjg. It is building in a little safety in terms of when current tax law rates expire.
MichDad
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Re: How do i calculate how much ROTH conversion I need

Post by MichDad »

Kalrocmk,

Our situation is somewhat similar to your. I'm a retired federal employee, age 66, with a FERS pension and a high TSP balance. My wife is also retired but worked in the private sector. When I turned 65, I decided to forego Medicare Part B, in part because I wanted to make large Roth conversions but for other reasons as well. When my wife turns 65, she'll also forego Part B. We're enrolled in GEHA standard option for our health insurance. I'm waiting until age 70 to collect my maximum Social Security benefits. My wife has already begun to collect her Social Security benefits.

In general, we've been Roth converting up to the $250,000 amount where the Net Investment Income Tax kicks in. I've set up an Excel spreadsheet detailing how we'll spend down and Roth convert my traditional TSP and our tIRAs over the next few years. We don't have to reduce those balances to anywhere near zero. They simply have to be low enough so that our future RMDs won't be significant enough to move us into a higher tax bracket. When I make those estimates, I assume that one of us will die before the other and the surviving spouse will be file as a single taxpayer.

Unless something completely unexpected arises, we won't need to touch our Roth assets until after I turn age 80. On a very happy or optimistic note, my projections for our combined Roth IRA balances at fourteen years from now are mind boggling.

MichDad
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retiredjg
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Re: How do i calculate how much ROTH conversion I need

Post by retiredjg »

MichDad wrote: Sat Jan 29, 2022 9:32 am I've set up an Excel spreadsheet detailing how we'll spend down and Roth convert my traditional TSP and our tIRAs over the next few years. We don't have to reduce those balances to anywhere near zero. They simply have to be low enough so that our future RMDs won't be significant enough to move us into a higher tax bracket.
I meant to mention this too. There is no need to eliminate the tax-deferred account. Just trim it down to a size that does not present such a problem when RMDs start. And continue trimming even after RMDs if you can at a reasonable rate.
GrowthSeeker
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Re: How do i calculate how much ROTH conversion I need

Post by GrowthSeeker »

My gut feeling based on your post (and gut feelings are not always accurate) is to go into the 24% bracket to the NIIT threshold. But optimizing Roth conversion strategy depends not only on current data and predictions about the future, but also on what future time frame you're optimizing for: for your life expectancy, your spouse's life expectancy, or your heirs?

To be more practical, you could consider three options in increasing order of difficulty
(1) i-orp is a quick way to look at your situation. There is a short learning curve but you can get a rough idea.

(2) The Retiree Portfolio Model is a massive Excel spreadsheet (also compatible with LibreOffice Calc) created by a Boglehead BigFoot48. Much more detailed answers. Much steeper learning curve. There is a wiki entry about it, and a long term ongoing thread about it.

(3) Make your own spreadsheet, this can be as complex as you like but the less complex it is, the less likely that you will be capturing the essence of the problem enough to make a valid conclusion. When I did this, I included the idea that a dollar in Roth is worth a dollar, a dollar in Taxable is worth a little less because some of your assets have unrealized taxable gains, and a dollar in IRA is worth quite a bit less because it will eventually be taxed. This concept pushes the decision toward a little more Roth conversion than would otherwise be considered optimal.

In the end, it is impossible to be completely accurate because you have to make assumptions about the future.
Just because you're paranoid doesn't mean they're NOT out to get you.
capran
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Re: How do i calculate how much ROTH conversion I need

Post by capran »

kalrocmk wrote: Fri Jan 28, 2022 10:02 am This forum has been a godsend for me. I appreciate all that I have learnt here and the advice that I have received in the past. I am very close to retirement and want to figure out how to evaluate how much ROTH conversions I need to do.

Background: I will be 65 in April, my wife will be 58 in March. We have about $2.3M in our 401 (k)s and IRAs - 1.4 in mine, $900K in hers. We are both planning to retire in April. My COLAd pension will be $50k/year. I intend to start my SS estimated at $48K/year at age 70. She will start her pension ($15K) and SS ($22k) at age 62. We will have federal government employee health insurance in retirement and will not need to take Medicare part B. We also will have about $20K a year in dividends/LTCG from our taxable brokerage accounts. Our expenses are currently $100K/year not including income taxes.

My plan is to do ROTH conversions to top of 22% tax bracket, but am worried that it might not be enough. How do I calculate the optimal amount to convert? is there a simple calculator that I can use? The scenario I would like to plan for would be that one of us passes away in 10 years.

:sharebeer
I am assuming you do not have to worry about IRMAA income limits because you're not using the Medicare system. Lucky you!!!!
I could do a more accurate spread sheet to stagger on a year by year basis when the income streams kick in given different years when SS and pensions kick in, so if my formula makes sense you can modify it. Basically, my table is set for when all income streams are active. I put pension in Column 1, SS in 2, CG/Div/INT in column 3. RMD in column 4, Total income column 5, RMD divisor column 6, deferred balance column 7. if you decide to use this formula, add an age column/year column and put in when that income stream comes on line ie when each gets SS, pension and SS. use the auto sum features in excel for the rmd auto fills based on the deferred balance. the deferred balance gets auto filled from the prior balance less the rmd. you can then plug in a column of the top of the 22% tax bracket, and use the auto sum feature to determine how much you need to convert to bring you to that level. PS I have tried to use the format method so the columns copy and paste, but have not figured that out, hence all the hyphens to keep the columns aligned.

----------------------------------------------------------------------------------------------------RMD -----Deferred balance
-----P-------------------SS-----------DIV/int/CG-----------RMD-----------total income----divisor---$2,300,000.00
$65,000.00-------$70,000.00 ----$20,000.00------$83,941.61 -------$238,941.61---- 27.4 -----$2,216,058.39
$65,000.00 ------$70,000.00 ----$20,000.00------ $83,624.85------- $238,624.85 ---26.5------$2,132,433.55
$65,000.00 ------$70,000.00---- $20,000.00------ $86,684.29--------$241,684.29----24.6-----$2,045,749.26
2pedals
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Re: How do i calculate how much ROTH conversion I need

Post by 2pedals »

There is no easy way to calculate this. There are many different scenarios that you may wish to look at. I would concentrate on looking at things like.

Are you likely to move to a different state with a different tax retirement income tax structure?
What marginal tax brackets will your heirs likely be in after they inherit?
How many years would the surviving spouse be living and filing taxes as single?
How much do you plan on giving to charitable donations?
Will you have significant lumpy expenses that could place you in higher tax brackets later?
ChrisC
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Re: How do i calculate how much ROTH conversion I need

Post by ChrisC »

We've been converting to the top of the 24% bracket for the most part of our retirement since 2013. We don't pay that much attention to IRMAA (only one of us is subject to that and I could easily dis-enroll from Part B) and NIIT has not been a factor for us, as our taxable accounts throw off modest dividends and we have no rental income or capital gains. However, this year we're expecting to book sizeable capital gains from the sale of real estate investment property (unless we do a 1031 exchange) but I'm pretty sure this won't affect our Roth conversion strategy.

Like others have said, it's not necessary or perhaps wise to reduce your TDAs to zero, as you might want to keep some chump change there for tax deductible medical expenses or QCDs.

Most here do the spreadsheet thing to assess the optimal levels of Roth conversions. I've given up on that precision, and just ball-park my conversion level -- it's not worth our efforts to be so precise about this stuff. (Likewise, we don't have excel spreadsheets for income or expenses and we've never formally been on a budget, either). Figuring out the appropriate level of conversions, is a very good problem to have and if we leave some money on the table -- oh well, my heirs will be more than happy to have the Roth accounts at the level we've handed off to them.
Last edited by ChrisC on Mon Jan 31, 2022 10:48 am, edited 1 time in total.
PaulieLilly
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Re: How do i calculate how much ROTH conversion I need

Post by PaulieLilly »

My experience/comments on GrowthSeeker's three tools listed above:
1) i-orp - Cool tool, but I found it too aggressive and mysterious for me
2) Retiree Portfolio Model (RPM) - Great tool! I found it pretty easy to master, very insightful and love the graphical results, etc. One caution is the final portfolio results are all PreTax so you have to apply your own tax rate projections accordingly.
3) Make your own spreadsheet - I consider myself pretty good in Excel but the more time I spent on this the more I realized how good (and easy) the RPM was.

I'd add a 4th useful resource ... the marginal tax charts generated in the Personal Finance Toolbox https://www.bogleheads.org/wiki/Tools_and_calculators (scroll down to Personal Finance Toolbox)
Here is a link to a Youtube tutorial from BH FiveK https://youtu.be/aklksEtT3rc?t=1

I generated this chart for myself in 2021. I based my actual 2021 Roth conversion on a marginal tax rate comparison for 2021 vs my projected rate for 72+.
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kalrocmk
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Re: How do i calculate how much ROTH conversion I need

Post by kalrocmk »

Thank you everyone for your sage advice. this has been a very useful exercise for me. I think that my take aways are:
- it is very difficult to optimize the Roth conversion level. It depends on several unknowable factors such us my life span, actual returns, amount of QDs, LTCG, and other income, etc.
- there is no need to zero out the balance in my IRAs before the RMDs kick in.
- I should shoot for to the top of the 24% income level considering the amount currently in our 401 (k)s.

I will also try out the i-ORP and other tools, but I think that it will be relatively straightforward to estimate the amount I need to convert based on the income for the year.

Appreciate all the help.

:sharebeer
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Lee_WSP
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Re: How do i calculate how much ROTH conversion I need

Post by Lee_WSP »

There is no truly optimal target as tax laws will change and the variable with the largest impact is completely beyond your control. Rate of Return.

But you can make a best guess. Use a real rate of return, see where your RMD’s are going to fall and what bracket they will be in. Then, convert up to that bracket.

Remember, the conversion game is a game of arbitrage. You win if you convert at a lower rate than you would have paid if RMD’s forced you into a higher rate. You lose if you convert at a higher rate than you would have paid if you hadn’t converted. You neither win, nor lose if you convert at exactly the same rate as you would have paid if you didn’t convert. Most of the time, you neither win nor lose, and even when you win or lose, you’re usually talking a rate difference of 2%. So, just be careful around the two shoulders (12-22 and 24-32)
capran
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Re: How do i calculate how much ROTH conversion I need

Post by capran »

Lee_WSP wrote: Mon Jan 31, 2022 10:52 am There is no truly optimal target as tax laws will change and the variable with the largest impact is completely beyond your control. Rate of Return.

But you can make a best guess. Use a real rate of return, see where your RMD’s are going to fall and what bracket they will be in. Then, convert up to that bracket.

Remember, the conversion game is a game of arbitrage. You win if you convert at a lower rate than you would have paid if RMD’s forced you into a higher rate. You lose if you convert at a higher rate than you would have paid if you hadn’t converted. You neither win, nor lose if you convert at exactly the same rate as you would have paid if you didn’t convert. Most of the time, you neither win nor lose, and even when you win or lose, you’re usually talking a rate difference of 2%. So, just be careful around the two shoulders (12-22 and 24-32)
Very true. We are being aggressive for two reasons. One, the tax cuts will likely expire in 2026, which means that 22% multiplier on the tax computation page listed after the tax tables will most likely go to what it was in the tax computation page of 2016, which is 25% (MFJ). Sure, something may happen to extend or re-authorize it, but I'm not holding my breath, and sticking with what current law projects. The second reason is due to a forward view of age and death. It is very likely my spouse will outlive me (3 years younger and has family history of longevity), which means her income will be taxed at the single rate, which will automatically bump her into the top of the current 24% bracket (and 27% as of 2026), as well as 100% guarantee of being into the first IRMAA penalty/surcharge. She might even be bumped into the 32% bracket (35% in 2026). Those two are good enough reasons in my book. If I somehow live well past my family historical expectations, we may pay a little more in the long run, but not much.
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Lee_WSP
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Re: How do i calculate how much ROTH conversion I need

Post by Lee_WSP »

capran wrote: Mon Jan 31, 2022 12:05 pm
Lee_WSP wrote: Mon Jan 31, 2022 10:52 am There is no truly optimal target as tax laws will change and the variable with the largest impact is completely beyond your control. Rate of Return.

But you can make a best guess. Use a real rate of return, see where your RMD’s are going to fall and what bracket they will be in. Then, convert up to that bracket.

Remember, the conversion game is a game of arbitrage. You win if you convert at a lower rate than you would have paid if RMD’s forced you into a higher rate. You lose if you convert at a higher rate than you would have paid if you hadn’t converted. You neither win, nor lose if you convert at exactly the same rate as you would have paid if you didn’t convert. Most of the time, you neither win nor lose, and even when you win or lose, you’re usually talking a rate difference of 2%. So, just be careful around the two shoulders (12-22 and 24-32)
Very true. We are being aggressive for two reasons. One, the tax cuts will likely expire in 2026, which means that 22% multiplier on the tax computation page listed after the tax tables will most likely go to what it was in the tax computation page of 2016, which is 25% (MFJ). Sure, something may happen to extend or re-authorize it, but I'm not holding my breath, and sticking with what current law projects. The second reason is due to a forward view of age and death. It is very likely my spouse will outlive me (3 years younger and has family history of longevity), which means her income will be taxed at the single rate, which will automatically bump her into the top of the current 24% bracket (and 27% as of 2026), as well as 100% guarantee of being into the first IRMAA penalty/surcharge. She might even be bumped into the 32% bracket (35% in 2026). Those two are good enough reasons in my book. If I somehow live well past my family historical expectations, we may pay a little more in the long run, but not much.
Bracket compression is certainly one of those “can’t predict too well, but has a large impact” kind of events.

Personally, I think erring on the side of Roth is not a bad play. It has enormous benefits for estate planning. I think for those able to stay under 12% it just doesn’t matter much. And for those thinking of converting in the 32% bracket, you just need to be sure that 34% is a realistic possibility at a reasonable rate of growth OR have an additional estate planning motive. If not, staying in the 24 is safer.
hvaclorax
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Re: How do i calculate how much ROTH conversion I need

Post by hvaclorax »

Simple Simon here
Roth up to what you believe your heirs and charities will need. Our kids want us to enjoy our retirement as we’ve worked darn hard to achieve. tIRA at the level that 4% draws keep your taxes bearable and your spending needs met. So $3 million for $120k per year as an example. Maybe more. Usually tIRA continues to grow because RMDs grow less than the 7,8,or 9% we see in a well balanced portfolio up to age 85-90 depending. Then RMDs exceed. That’s why it’s so difficult to pin down any particular number or long term plan.
Between those goals you in your particular case have a lot of room to maneuver. McQuire has good advice detailed in this blog elsewhere and you should have a good look. I’m in favor of not overdoing the conversion as your lifetime wealth is increased by only one or two percent. Tax savings in a highly unknown future where numbers don’t tell the uncertainty hidden in the future. Again according to McQuire.
Thanks for listening, HVAC
Silk McCue
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Joined: Thu Feb 25, 2016 6:11 pm

Re: How do i calculate how much ROTH conversion I need

Post by Silk McCue »

hvaclorax wrote: Sun Feb 06, 2022 5:22 pm Simple Simon here
Roth up to what you believe your heirs and charities will need.
Why would you include Charities for Roth? They don’t pay taxes. You should target tax deferred for them.

Cheers
hvaclorax
Posts: 598
Joined: Mon Nov 21, 2016 5:01 pm

Re: How do i calculate how much ROTH conversion I need

Post by hvaclorax »

Silk McCue wrote: Sun Feb 06, 2022 5:47 pm
hvaclorax wrote: Sun Feb 06, 2022 5:22 pm Simple Simon here
Roth up to what you believe your heirs and charities will need.
Why would you include Charities for Roth? They don’t pay taxes. You should target tax deferred for them.

Cheers
In my mind, they are one in the same IE gift that leaves my control. Roth should not be touched until after death. Similarly gifting is out of one’s portfolio and hopefully into the recipient portfolio.
I didn’t mean to imply that charities would come from the Roth account, that would be silly.
HVAC
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