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jsgusps
I plan to retire at the end of January 2007. I will have
$157,000 in a 457 plan and $97,000 as a partial distribution
from a retirement plan that I plan to roll into a
traditional IRAs upon retirement; and $21,000 already in a
traditional IRA.
My thought is to try to convert the 457 and traditional
IRAs into Roths before the magic age of RMDs (70.5) and,
coincidently for me, the year that the current tax rate may
change for the worse.
If I convert the $21,000 traditional IRA this year to a
Roth, it will throw me in the 28% bracket . My son tells me
that I should leave the money in traditional IRAs, take RMDs
and not take the big tax hit, now or later; just let my
heirs pay the taxes if there is anything left over. I
believe that if I live another 20 years, God willing, I
will be paying more taxes in the long run just from regular
monthly income, interest income and RMDs. And be paying
more taxes at a time when it will take more of my income to
live on due to inflation.
Also, when RMDs begin, should I have "surplus" money to
invest, those investments will make me more taxable money.
If I have it in Roth accounts it is still making money, but
I can take out money only when I want and not have to worry
about additional taxes. If I leave money for my heirs,
that's great, but my main interest is taking care of myself
over my lifetime.
I am single, 66 =BD and will take the standard deduction
this year (but not next). My AGI for 2006 will be about
$73,700.
I expect an annual income after retirement of about $70,
300. I have no debt. My cost of living is less than
two-thirds of my current income. I have but 3 years to
convert to Roths before RMDs begin. It would be a big tax
hit in years 2007- 2010 to convert the new $264,000 (due
at retirement) over to Roths, but I am thinking that I
should convert at least part of that, and for sure the
$21,000 IRA this year. Am I on the wrong track?
$157,000 in a 457 plan and $97,000 as a partial distribution
from a retirement plan that I plan to roll into a
traditional IRAs upon retirement; and $21,000 already in a
traditional IRA.
My thought is to try to convert the 457 and traditional
IRAs into Roths before the magic age of RMDs (70.5) and,
coincidently for me, the year that the current tax rate may
change for the worse.
If I convert the $21,000 traditional IRA this year to a
Roth, it will throw me in the 28% bracket . My son tells me
that I should leave the money in traditional IRAs, take RMDs
and not take the big tax hit, now or later; just let my
heirs pay the taxes if there is anything left over. I
believe that if I live another 20 years, God willing, I
will be paying more taxes in the long run just from regular
monthly income, interest income and RMDs. And be paying
more taxes at a time when it will take more of my income to
live on due to inflation.
Also, when RMDs begin, should I have "surplus" money to
invest, those investments will make me more taxable money.
If I have it in Roth accounts it is still making money, but
I can take out money only when I want and not have to worry
about additional taxes. If I leave money for my heirs,
that's great, but my main interest is taking care of myself
over my lifetime.
I am single, 66 =BD and will take the standard deduction
this year (but not next). My AGI for 2006 will be about
$73,700.
I expect an annual income after retirement of about $70,
300. I have no debt. My cost of living is less than
two-thirds of my current income. I have but 3 years to
convert to Roths before RMDs begin. It would be a big tax
hit in years 2007- 2010 to convert the new $264,000 (due
at retirement) over to Roths, but I am thinking that I
should convert at least part of that, and for sure the
$21,000 IRA this year. Am I on the wrong track?
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