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Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Quote:
...convert a part of a 401k to a Roth
it Depends...
401k's are bit tricky and not all the same in terms of rollovers. (Depends on the custodian and contracts)
My ex-company (Fidelity holds it's IRA), required ENTIRE 401k to be 'exchanged / converted to a tIRA - "Rollover" ', rather than do multiple conversions from 401k. Thus entire 401k would need to roll to a conventional Rollover IRA (No tax obligations if you follow the rules), and THEN The 'Rollover' IRA could do Roth Conversions. But... my newest 401k also includes 80% Roth 401k funds, and I CANNOT get those funds without rolling my entire 401k, of which the Roth 401k portion would roll to a Roth IRA and the taxable to a traditional rollever tIRA.
I only keep my 401, as it has benefitical legal protection and my many choices of investment have very low fees. When I initially left employment I rolled my then existing 401k into a Rollover IRA. (It was all tIRA taxable upon withdrawal, and subject to RMD's.)
I am rolling to IRA as possible, but not terribly concerned about the remaining funds stuck in tIRA and subject to future tax rates. I will always be in the lower tax tiers (whatever they will be), but pretty safe to say us po-folks, will not get hammered or targetted for future windfall taxation. I expect 10 - 15% will be my top tax bracket throughout my lifetime. I could be wrong, but taking that risk rather than paying over 15% for IRA / 401k money that I don't need, and may never see. (Will go to heirs / my DAF).
Boglehxxds would give you more precise advice, since there are many professionals / retirees who are savvy enough to guide you. C-D is a relocation centric message board. Some people who relocate must also desire light-weight (casual) financial discussions.
I am not aware of tax software that lets you just "practice" or run theoretical scenarios. I am hesitant to begin filing my 2023 taxes on turbotax just to run this scenario.
I suppose I can save this attempt for when I do my real taxes, then before submitting them I could add in a Roth conversion and see the difference, then erase it. I would just hate to do somethign stupid and accidentally file it that way.
Just use your 2022 turbo tax. You can enter new numbers and save it as a different file from the original. This gives you a thumb in the wind 'what if' calculation. I don't think too much is changing 2022-2023.
Also, get a fee based CPA to run the calcs for you and see if they are aware of anything else. Do this outside of tax filing season where they have time to help you do some planning.
Meanwhile, I will have to ponder how dividends and income limits and Medicare affect my financial planning.
Qualified dividends are taxed at the same rate as long term capital gains. Most public corporate dividends, and the funds or EFTs that hold them, fit the definition of qualified. Non-qualified dividends are taxed at your ordinary income rate, like interest, such as payouts from REITs. See the definitions:
These distinctions have existed since 2003 and were not part of the 2017 tax act. But, the tax laws are anything but constant and I consider them all to be subject to change with limited notice.
Just use your 2022 turbo tax. You can enter new numbers and save it as a different file from the original. This gives you a thumb in the wind 'what if' calculation. I don't think too much is changing 2022-2023.
Also, get a fee based CPA to run the calcs for you and see if they are aware of anything else. Do this outside of tax filing season where they have time to help you do some planning.
Good point. I have already filed so it should not ask me to file. Thanks. Will try.
Just use your 2022 turbo tax. You can enter new numbers and save it as a different file from the original. This gives you a thumb in the wind 'what if' calculation. I don't think too much is changing 2022-2023.
Also, get a fee based CPA to run the calcs for you and see if they are aware of anything else. Do this outside of tax filing season where they have time to help you do some planning.
AFAIK from 2022-2023 the numbers for the brackets may have changed. You should get that from IRS.
May depend where your numbers fall in the brackets.
Maybe try IRS estimated tax calculator & forms for estimated tax.
AFAIK from 2022-2023 the numbers for the brackets may have changed. You should get that from IRS.
May depend where your numbers fall in the brackets.
Maybe try IRS estimated tax calculator & forms for estimated tax.
Yes, they have changed. But, probably will not have a material impact on his calculation. That's why I said "thumb in the wind" estimate. I also said to see a CPA to find out what you are missing in your planning.
I am not aware of tax software that lets you just "practice" or run theoretical scenarios. I am hesitant to begin filing my 2023 taxes on turbotax just to run this scenario.
I suppose I can save this attempt for when I do my real taxes, then before submitting them I could add in a Roth conversion and see the difference, then erase it. I would just hate to do somethign stupid and accidentally file it that way.
Try out Tax Caster. It’s an Intuit program to determine your tax burden based on your entries. I use it all the time since my hubby is 100% commission and our tax bill is a moving target.
Try out Tax Caster. It’s an Intuit program to determine your tax burden based on your entries. I use it all the time since my hubby is 100% commission and our tax bill is a moving target.
Also available as an app for Apple devices (probably Android too, but I couldn't say for certain). I like the user interface for the app better than the web version.
Lets say you convert $200,000 from a 401k to a Roth IRA. What is the tax impact of that? How much cash would I need to have on hand for a nominal 24% tax bracket to pay for taxes on that?
I can't see the benefit in that as you pay the full tax as you convert anyway? Six of one....?
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