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Anyone doing Roth conversions this December?

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  • Anyone doing Roth conversions this December?

    I'm likely going to be in the 24% bracket with not much headroom, 5% state. I'm leaning against it. Of course the market had to soar to new records at the end of the year.

    I still think I'll put all my retirement money in Roth/after tax for the year but I have until April to figure that out.

  • #2
    I did back in March since the markets were down. Wish I had done more. Not planning to do any due to market highs although we probably could do another $10k before we are bumped into 32%. December would have to an an awful month, pretty similar to March, if I were to do that, and I don’t think that’s likely

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    • #3
      don’t forget to factor in potential QBI deduction and child tax credits if applicable. Lots of tax stuff happening around that transition area 24 to 32 bracket

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      • #4
        Deleted.
        Last edited by Larry Ragman; 12-06-2020, 02:03 PM. Reason: Deleted. Original response was a misread of the question.

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        • #5
          Originally posted by Larry Ragman View Post
          I do my BD Roth’s in January when my bonus is paid. One for me, one for my wife. I also transfer my 401a after tax to 403b Roth for a MBD Roth then. The other MBD Roth is set up to transfer automatically each pay period.
          this has nothing to do with the OPs question.

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          • #6
            yes i am in the process of doing so. finished training earlier this year so i am planning to convert ~30k in 401k/401a into roth IRAs before our tax bracket increases next year. we are now in the 24% tax bracket so looking at 8k in taxes being due next year.

            i'm glad i realized we should do this before this calendar year ended. but i am kind of kicking myself that i'll be doing this conversion when the market is at all times highs. oh well. still seems like the right move long term.

            i've been trying to do the conversions online for the past few days, but it seems like i'm going to have to speak to fidelity/vanguard customer service to actually get things converted.

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            • #7
              Originally posted by jacoavlu View Post

              this has nothing to do with the OPs question.
              Oh, shoot, it doesn’t. Just a misread. I deleted the response, thanks.

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              • #8
                Yes if the numbers work out. Got my info to the CPA and just got the cost segregation firm's numbers on Friday so how much will depend on where we stand tax wise. It looks like the cost seg study will shelter about $1.6M in income from IRA distributions we did to purchase the apartment property this year. Any left over we'll use to cover ROTH conversions.

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                • #9
                  No, not with my current positioning in the bracketology.

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                  • #10
                    Originally posted by pitt1166 View Post
                    yes i am in the process of doing so. finished training earlier this year so i am planning to convert ~30k in 401k/401a into roth IRAs before our tax bracket increases next year. we are now in the 24% tax bracket so looking at 8k in taxes being due next year.

                    i'm glad i realized we should do this before this calendar year ended. but i am kind of kicking myself that i'll be doing this conversion when the market is at all times highs. oh well. still seems like the right move long term.

                    i've been trying to do the conversions online for the past few days, but it seems like i'm going to have to speak to fidelity/vanguard customer service to actually get things converted.
                    conversion at 24% plus state isn’t a slam dunk.

                    where are these funds? In an old 401k? Rollover into a new 401k?

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                    • #11
                      Originally posted by jacoavlu View Post

                      conversion at 24% plus state isn’t a slam dunk.

                      where are these funds? In an old 401k? Rollover into a new 401k?
                      they are in a 401a (university of california target retirement fund, good fund, low ER) and a 401k (S&P 500 index fund, low ER) from training (finished my training in june of 2020, so i'm about 5 months into being an attending). my total income for the 2021 year will probably be in the range of 450k, compared to 180k for the 2020 year.

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                      • #12
                        Originally posted by JBME View Post
                        I did back in March since the markets were down. Wish I had done more. Not planning to do any due to market highs although we probably could do another $10k before we are bumped into 32%. December would have to an an awful month, pretty similar to March, if I were to do that, and I don’t think that’s likely
                        In hindsight I wish I had done conversions in March and April, but I had no idea if I'd have any room to do conversions before getting bumped to 32%. Though doing conversions taxed at 32% after a 35% market drop is obviously better than doing them at all time highs even if they're taxed at 24%.

                        All of that is easy to say now. I started a poll in March to assess when most of us thought the market would reach new all time highs. I think I voted 2024. Hardly anyone said later in 2020.

                        I think two years ago we got a bear market around Xmas that was over before you could blink.

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                        • #13
                          Originally posted by Lithium View Post
                          I'm likely going to be in the 24% bracket with not much headroom, 5% state. I'm leaning against it. Of course the market had to soar to new records at the end of the year.

                          I still think I'll put all my retirement money in Roth/after tax for the year but I have until April to figure that out.
                          You must have a ton of pre-tax savings to be doing this.

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                          • #14
                            Originally posted by ENT Doc View Post

                            You must have a ton of pre-tax savings to be doing this.
                            Not really. The basis for considering this is future passive income leading up to retirement including:

                            457b drawdown starting next year

                            potential bequests from relatives (accelerated withdrawals due to SECURE act)

                            distributions from RE equity funds - sheltered somewhat by depreciation

                            All of this potentially limits my tax planning flexibility over time.

                            and then there’s the risk of future tax hikes.

                            Roth/after tax retirement contributions have the additional benefit of increasing Sec199A deduction, which may not be available after TCJA expires.

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                            • #15
                              Originally posted by Lithium View Post

                              I still think I'll put all my retirement money in Roth/after tax for the year but I have until April to figure that out.
                              technically you don’t have until April but rather 12/31, for employee contributions

                              though your employee and employer contributions as a sole prop can be made up to tax filing deadline, per IRS regs you need to have an employee deferral election completed before year end

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