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Roth Conversions

Roth Conversions

IRAs, Tax Strategy

Roth conversions remain one of the most underutilized tax planning strategies around.

Imagine the limited benefits of continued tax deferral for a 90-year-old retiree with a $500,000 IRA and an income of $100,000 a year. That income is comprised of pension distributions, IRA required minimum distributions (RMD), and some dividend income. Let’s say she has two grown children in their 60s, each earning $600,000 a year in a 41% tax bracket. Since Mom’s tax bracket peaks at 24% (up to around $170,000 worth of annual income), it would make perfect sense for her to do annual $70,000 Roth conversions, whittling down her $500,000 IRA and avoiding that next bracket of 32% above $170,000 in gross income.

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Gil's Musings

Learn about the world of investing from a 36-year industry veteran. Gil's Musings are inspired by Gil's thoughts on timely finance topics, stock market trends and the psychology behind smart investments.

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