Rollover IRA to Backdoor Roth IRA

[vijayash01]

Hello,
I have close to 12K in my rollover IRA. My wife is doing residency and she has 2 more years to go and then I think we will be in higher tax bracket. Does it make sense to do a backdoor Roth IRA now since we are in lower tax bracket?


Thanks,
Vijay

[jfoxcpacfp]

What is your income and tax bracket? Do you have the cash flow to fund the taxes on the conversion (state/fed)? I’m a huge Roth proponent, but I still recommend you consider pertinent info before making your decision.

[vijayash01]

Hi,
My wife and I file our taxes jointly (married). We have one son. Our combined income pre-tax is around 145K. After standard deduction it will be around 120K. If I did my math right we will be at 22% marginal tax rate and our effective tax rate would be 12%. Even after including short term gains (from stocks, etc) I don't think our marginal or effective tax rate would change. MI State Income tax is 4.5%. I just opened up 529 plan as well and plan is to contribute upto 10K to take full benefit of state income tax deductions. I wonder how much I will end up paying for the conversion? Does it make sense to convert it now or do it later?

[jfoxcpacfp]

Hi,
My wife and I file our taxes jointly (married). We have one son. Our combined income pre-tax is around 145K. After standard deduction it will be around 120K. If I did my math right we will be at 22% marginal tax rate and our effective tax rate would be 12%. Even after including short term gains (from stocks, etc) I don't think our marginal or effective tax rate would change. MI State Income tax is 4.5%. I just opened up 529 plan as well and plan is to contribute upto 10K to take full benefit of state income tax deductions. I wonder how much I will end up paying for the conversion? Does it make sense to convert it now or do it later?

If I were in that situation, I’d likely convert. Jmpo. Also consider that there may not be a later under the proposed tax legislation, but I don’t recommend making a decision today on what might (or might not) happen in the future.

[vijayash01]

Thank you. Really appreciate you sharing your thoughts on this.

Have a wonderful rest of your day

Thanks,
Vijay