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Hello Bogleheads. I have about $88k in a rollover IRA from a prior employer and am looking to either convert it to Roth or roll it into my existing employer’s 401k plan so that I can avoid issues with the pro rata rule. I’ve been given conflicting advice about converting to Roth and wanted to test that with this group in case anyone had any thoughts they could share with me. The facts are:
-I’m in a high tax state and in the 35% tax bracket with space in my bracket to convert the whole IRA.
-I really don’t expect to move to a low tax state in the future, but one never knows.
-I expect my tax bracket to go up next year and to continue in the highest bracket for the foreseeable future.
-the bulk of my retirement savings are pre-tax, including a defined benefit plan. I’m not sure if I have an “RMD problem” but it’s come up.
-while I can roll into my existing 401k and have a balance in that plan, going forward my employment status with my employer will change and as a result I will not be permitted to contribute to the plan, including for mega backdoor Roth purposes.
-We have $20k in Roth dollars and access to only $6k in additional annual Roth contributions if the IRA remains unconverted (and another $6k annually if converted).
-I likely will be in the 28% tax bracket in retirement, if not higher.
-I expect today’s 28% tax bracket rate to be higher in my retirement.
-I am 38 y o and hope my $88k IRA will grow substantially over the next several decades.
-my 401k investment options are meh and I use the IRA to invest in tax inefficient asset classes that are unavailable in my 401k. If I convert, those investments will need to be made in my taxable account.
Given the above, you can tell I’m generally leaning towards converting to preserve tax sheltered space for my tax inefficient assets classes and because paying 35% (plus state tax) now on $88k sounds better than paying what I think will be more than 28% on $400k+ in retirement (assuming 6% growth to 65).
I also know people don’t recommend Roth conversions for folks above the 28% bracket so that gives me pause.
Thank you!
P.S. This was cross-posted on the Bogleheads forum so apologies for duplication!
-I’m in a high tax state and in the 35% tax bracket with space in my bracket to convert the whole IRA.
-I really don’t expect to move to a low tax state in the future, but one never knows.
-I expect my tax bracket to go up next year and to continue in the highest bracket for the foreseeable future.
-the bulk of my retirement savings are pre-tax, including a defined benefit plan. I’m not sure if I have an “RMD problem” but it’s come up.
-while I can roll into my existing 401k and have a balance in that plan, going forward my employment status with my employer will change and as a result I will not be permitted to contribute to the plan, including for mega backdoor Roth purposes.
-We have $20k in Roth dollars and access to only $6k in additional annual Roth contributions if the IRA remains unconverted (and another $6k annually if converted).
-I likely will be in the 28% tax bracket in retirement, if not higher.
-I expect today’s 28% tax bracket rate to be higher in my retirement.
-I am 38 y o and hope my $88k IRA will grow substantially over the next several decades.
-my 401k investment options are meh and I use the IRA to invest in tax inefficient asset classes that are unavailable in my 401k. If I convert, those investments will need to be made in my taxable account.
Given the above, you can tell I’m generally leaning towards converting to preserve tax sheltered space for my tax inefficient assets classes and because paying 35% (plus state tax) now on $88k sounds better than paying what I think will be more than 28% on $400k+ in retirement (assuming 6% growth to 65).
I also know people don’t recommend Roth conversions for folks above the 28% bracket so that gives me pause.
Thank you!
P.S. This was cross-posted on the Bogleheads forum so apologies for duplication!
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