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  • Roth conversion scenario

    I have 68K in 403b from previous employer and spouse has 20k in 403b from previous employer. Now, both of us are shareholders of our own corporation and have profit sharing plans for us and the employees. Thus, we are able to designate about 50K each every year in 401k. In addition, we have the usual accounts (backdoor roth for both of us, HSA). The balance in backdoor roth is 33k each.

    I wonder if it makes sense to proceed with roth conversion for both 403b accounts (able to pay taxes out of pocket) as I believe we might be able to accumulate enough in 401k if we continue to contribute 50k each year. The household income is expected to increase and the next step is to open taxable investment account. The tax bracket for 2015 was 33% and effective tax rate was federal 21% and state 7.04%. This year, the tax bracket is 39.6%, still going through calculating effective tax rate.

     

  • #2


    I wonder if it makes sense to proceed with roth conversion for both 403b accounts (able to pay taxes out of pocket)
    Click to expand...


    It is really hard to know (impossible to predict with certainty), but there is a lively discussion going on today in the thread Draw Down Strategy. Short of working with a planner who can help you focus on one or more methods, here are a few good strategies I can recommend:

    • Convert during a bear market

    • Also see part 1 of this series - Roth Conversions: how to build wealth

    • Convert strategically throughout the year or over a period of years - remember that you don't have to convert all at once

    • Segregate your conversions in sectors and recharacterize those sectors that are down on the due date for recharacterization

    • Convert during market dips - the market corrects, on average, 14% on average, on an intra-year basis

    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Johanna,

       

      Valuable info. Thank you.

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