Ask an Advisor: At 70, Does Converting $160k a Year From My IRA to a Roth Still Make Sense?

2 months ago 12

Brandon Renfro, CFP®

Mon, Apr 7, 2025, 6:30 AM 5 min read

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I americium 70 and I person $1.4 cardinal successful accepted IRAs. Is it champion to bash $160,000 successful Roth conversions for the adjacent 1-3 years to trim my precocious RMDs successful astir 5-10 years? That would enactment maine successful the 24% taxation bracket and $330 Medicare premium rate. Please springiness maine advice.

– Dennis

I bash deliberation you’re connected the close way to astatine slightest beryllium considering this. There are plentifulness of bully reasons that Roth conversions could marque sense. As I’m definite you’re aware, a batch depends connected the specifics of your circumstances and what your extremity goals are. I’ll spell done immoderate of the considerations present that volition hopefully assistance you determine what is champion for you.

Do you request further assistance with decisions similar Roth conversions? Speak with a fiscal advisor today.

There are respective reasons wherefore a Roth conversion could marque sense.

From a taxation perspective, Roth conversions marque consciousness erstwhile you judge you are successful a little marginal taxation bracket present than you mightiness beryllium successful later. Since the wealth volition beryllium taxed astatine immoderate point, wherefore not determine to bash it erstwhile you’ll instrumentality the smallest taxation hit?

Roth conversions besides summation the power you person implicit your status savings since Roth IRA accounts aren’t taxable to required minimum distributions (RMDs). This means it’s up to you to determine erstwhile you’ll retreat money, based solely connected your idiosyncratic wants and needs.

Converting pre-tax accounts into Roth accounts whitethorn besides marque consciousness if you deliberation you’ll extremity up leaving the wealth to heirs who are successful a higher taxation bracket than you. If they inherit a pre-tax account, they volition person to retreat the wealth and see it connected their ain taxation return. By converting the wealth into Roth assets, you volition summation the after-tax worth of their inheritance. (A fiscal advisor tin assistance you larn and determine connected a Roth conversion.)

A retiree looks implicit his IRA balances and calculates his RMDs.

It sounds similar you’re chiefly reasoning astir the taxation implications of Roth conversions, and perchance the flexibility that reduced RMDs whitethorn offer.

If so, I suggest estimating what you deliberation your taxable income is going to beryllium successful a fewer years if you don’t bash immoderate Roth conversions. Then, comparison it to what it mightiness beryllium if you do. This volition necessitate you to marque immoderate assumptions astir the instrumentality you expect for your investments since your RMDs are a relation of your property and relationship balances. You tin past comparison your taxation liability present with what you deliberation it mightiness beryllium successful the future. When you bash this comparison, you’ll besides person to marque immoderate assumptions astir aboriginal taxation rates.