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.....woud you take advantage of a 12 percent rate and convert all you can from a Trad IRA to a Roth IRA.
Or, keep as much as you can invested in the Trad IRA so all of it can grow, and roll the dice on tax rates later as in 15 years later .
One one hand the 12% rate suuure looks good, but it would lower the amount that would grow in the intervening years.
One one hand the 12% rate suuure looks good, but it would lower the amount that would grow in the intervening years.
That "tax deferred compounding" thing is more sizzle than steak. It's used for sales and doesn't translate into a huge savings. Your tax liability grows right along with the assets and your paying the income tax rate instead of long term capital gains. I'd make the decision based on the tax rate.
I'm not sure what the actual tax rate is now but I'd jump on 12% today.
by the same token , for some it means with the increased standard deductions they can pull a lot more money out of traditional ira's at no or very low tax rates if delaying ss .
today a couple can pull as much as 22k out tax free and over 40k with 4.50% in taxes . with the increased standard deduction those numbers will go up .
so conversions may not be worth doing because you will pay way more . it really depends on your income level and sources of income.
some roths , living on cash set a side and the 4.50% ira money can provide a 100k plus income while delaying ss
Mathjack, what you're talking about would benefit people already pulling from an IRA, right? Which is good to know.
The GOP tax "cuts" or bracket changes are only for 8 years starting next year. (if I'm correct about that)
In my case, my Trad IRA was a rolled over 401K, which I'll never add to. And being in the 12 bracket for the next 8 years, I feel I've got to jump on that rate and move as much over as I can during those years into my already existing Roth. I'll never being in a lower bracket.
Captain, thanks for your POV on this. That's exactly what I'm weighing......grab the 12 bracket now -- vs -- live the pre-tax money in tact, let all of it growth and pay taxes later. Is having all the pre-tax grow worth paying higher (percentage) taxes later.
I'm leaning toward grabbing that 12% now. I am LOVING that 12%!
Mathjack, what you're talking about would benefit people already pulling from an IRA, right? Which is good to know.
The GOP tax "cuts" or bracket changes are only for 8 years starting next year. (if I'm correct about that)
In my case, my Trad IRA was a rolled over 401K, which I'll never add to. And being in the 12 bracket for the next 8 years, I feel I've got to jump on that rate and move as much over as I can during those years into my already existing Roth. I'll never being in a lower bracket.
Captain, thanks for your POV on this. That's exactly what I'm weighing......grab the 12 bracket now -- vs -- live the pre-tax money in tact, let all of it growth and pay taxes later. Is having all the pre-tax grow worth paying higher (percentage) taxes later.
I'm leaning toward grabbing that 12% now. I am LOVING that 12%!
You do know that the 12% bracket goes up to $38,700. If you are working that may only provide you a small amount to convert each year at 12% federal taxes. Last year you could have done the same at 15% so it's not like this is some huge lifetime opportunity imo.
You do know that the 12% bracket goes up to $38,700.
Yes, I know -- a taxable income up to 38,700.
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Last year you could have done the same at 15% so it's not like this is some huge lifetime opportunity imo.
I haven't been in the 15% tax bracket in decades.
Last year (2016) I was still working at a high paying job, hadn't gotten a severance package (2017) and that money was happily in my 401k.
So in my case, this year (2017) -- for one year only -- I'll be in an even higher bracket than my normal working career.
I've got a MUCH, much lower paying job now, and will be in the lowest bracket of my working life for the next 8 years until I retire.
in retirement with some careful planning you can have very little taxable income when you delay ss and live off other sources .
just using roths , up to 40k at 4.50% from your ira's , money set a side as cash , and over funding a life insurance policy and borrowing it out you can get one heck of a nice income. that nice income you get allows you to reduce rmds by up to 320k too over 8 years . imagine doing roths at 25% tax or conversions at 15% when you simply could possibly get 320k out with 4.50% tax .
The lower your current income tax rate the better it will be for you to go toward the ROTH. Problem is no one knows what the laws and your tax rate will be in the future. Thus as your income increases (and taxes) I would go for a mix of IRA and ROTH type of accounts. I would gamble on the ROTH being better in the long run.
in retirement with some careful planning you can have very little taxable income when you delay ss and live off other sources .
just using roths , up to 40k at 4.50% from your ira's , money set a side as cash , and over funding a life insurance policy and borrowing it out you can get one heck of a nice income. that nice income you get allows you to reduce rmds by up to 320k too over 8 years . imagine doing roths at 25% tax or conversions at 15% when you simply could possibly get 320k out with 4.50% tax .
How about if 85% of Social Security becomes taxable by doing the Roth conversion up to 12% as opposed to 0% SS being taxable without doing it?
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