Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
our finance advisor and our tax guy--different CPAs w/same firm-- have suggested we make Roth conversions from my husband's S-Corp defined benefit plan which was rolled over to an IRA earlier this year --2016.
Currently our taxable income is from my teacher's pension and my spousal SS and minimal amount from o/g production in the still extant S-Corp. That amount is probably going to be under 20K with some tax benefits so not straight $ for $...
So our taxable income will be lowest it has been in long time...
We have discussed maybe taking enough money to raise tax level to second tier but don't have anything concrete from them...they just finished our estimate for 2015 and filed for extension using projected K1s--but we always have to file extension and wait for completed return after the true K1s come in at last minute...
We have done IRA rollovers into Roths before and I know that is a taxable event and there is option to reverse the decision if the market has not been kind and the profit made is lower than the tax due...
My question(s)--and I hope I can explain clearly
1--when you make a choice like that you are doing it to take advantage of reduced income/tax brackets so you pay the least amount of additional tax and move the most money...because anticipate higher taxes in our case due to the amount of RMD taxable income you are required to take at certain point in future...
So you know that moving money into a Roth has a fixed time frame...only so many years to do it cost-effectively...
2--when you look at how that conversion amount has done in market in the time between the change and when you can reverse it--I think it is tax filing deadline of April 15 in 2017 for a 2016 conversion--
Do you ONLY consider the profit/loss of the amount vs the taxes paid for the amount converted??
OR do you also consider the long term effect of sheltering $X long-term from taxes either for yourself or as an inheritance vehicle?
And if you are making a conversion like that is it to your advantage to do it as early as possible in the year so that the money has longer to show a profit--or do you make the conversion. Keep that amount in cash or short term govt bonds until there is buying opportunity if it didn't really cost you that much in taxes??
The reason I ask is the market is so volatile recently and payout levels are predicted to be low for forseeable future especially if you are in a conservative investment profile with mix of bonds, mutual funds, and REIT in portfolio...
So if you are doing this to avoid taking higher RMDs which increase your taxes and raise your Medicare surcharge premiums (which we are paying now) then doesn't the tax benefit also factor into the decision to reverse the move??
Would you just decide that whether the market goes up or down in that reversible time period that the sheltering of another 40- 60-80 K (don't know how much they will decide to move) is primary to a 4% gain?
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
