Thoughts and musings from my desk to you.
Roth ConversionsIRAs, 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.Read More