Getting Your Financial Ducks In A Row Rotating Header Image

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  1. [...] if you converted your account over several years in smaller amounts using a strategy like filling up the brackets, the overall tax cost of the conversion will be less, maybe even less than the cost that your heirs [...]

  2. Friday Reading: Convert to Roth Or Realize Capital Gains - The Finance Buff says:

    [...] End of Year Roth Conversion Strategy: Fill Up the Bracket from Jim Blankenship at Getting Your Financial Ducks In A Row [...]

  3. ron dombcikNo Gravatar says:

    Thanks for the commentary Jim. Good stuff.
    I am in exactly the scenarios you discuss. If I do nothing, I will be in 10% bracket and 25% of SS taxable. We are 78+76 next year and we both have a Roth over 5 years now. I was thinking of doing another roth conversion. We have no earned income. So I would get bumped up to 15% and more SS taxable. I also thought about just taking more distribution from my IRA to reduce future RMD, but same problem. I could take capital gains or just leave for the kids since no need for the cash in the near future. We have about $35,000 unrealized gains available. I’m inclinded to just do nothing. Make sense?

    1. jblankenshipNo Gravatar says:

      If any appreciable amount converted would bump you into another tax bracket, I’d be inclined to agree with you – leave it alone, take your RMD each year, and pay a little tax as you go. No need to pay the tax early at a higher rate.

      jb

  4. jim santosNo Gravatar says:

    Thank you for a great idea.
    Why does the conversion have to be done by the end of this year? Could it be done by April 15,2012 when I would have a better idea of my taxable income for 2011.
    Also I recharacterized on 9/26/11 a conversion that I had made on 2010 since the value of the mutual funds had dropped. Don’t I have to wait until the next year (2012) to make another conversion?
    Your advice would be greatly appreciated.

    1. jblankenshipNo Gravatar says:

      Jim,

      The conversion could be done next year, but the income would be recognized in 2012 at that point.

      Once you’ve recharacterized a conversion, you can’t reconvert until the following tax year (or 30 days, whichever is longer).

      Hope that helps -

      jb