I think my parents have a "high-quality problem" and I'm hoping this forum can help me generate a few more ideas for them. Mom is 68 and draws a state government pension and Social Security benefits. Dad is 74 and draws a state government pension and Social Security benefits too. Both are on Medicare. Both are able to live modestly off their pensions and Social Security and thus have no real need to drill into their savings account. Both also have rollover IRAs and Roth IRAs. Because of dad's age, he's required to take a minimum amount yearly from his rollover IRA. They have minimal other income (like some interest off of their savings account). Both file taxes jointly.
Because of all this, I see no immediate opportunities to trim income and thus I see no immediate opportunities to get them into the 10% marginal tax bracket (currently in the 15% bracket I believe). And when it comes to how much of their Social Security is taxable, they seem to make just enough "provisional income" over $44000 that some is exposed at that 85% level. So this leaves me wondering how to handle their rollover IRAs. They don't really need those funds now or even in the near-term, but dad is forced to take RMDs (this is partly why their income ticks over $44k in provisional income), and mom will join him in a few years.
So a conversion to their Roths makes some sense. Of course we want to be mindful of avoiding the next higher marginal tax bracket, and to avoid higher Medicare premiums next year. But, for example, converting $10k from their rollover IRAs to their Roth IRAs doesn't just mean $10k extra in income to show on returns it seems. It means $18.5k extra, because another $8500 of their Social Security benefits would be exposed to taxes in this example.
That seems like an ouchie... but is this just a case of "pay it now or pay it later?" If they have no immediate options of lowering income and potentially higher income once mom's RMDs kick-in, all of it will be provisional income over that $44k bound, and thus subject to the same math now or later. Except if later in the form of a RMD, they won't have the option of getting it into the Roth for those yummy benefits, right? Am I missing anything? Any other options/ideas?