"Sweet Spot" on Roth Conversions, with Social Security | Ed Slott and Company, LLC

"Sweet Spot" on Roth Conversions, with Social Security

I've recently had another thread full of questions going. But momentum on that thread seems to have stalled, so I figured to try a fresher one for a new approach. I have parents taking Social Security, pensions, and a RMD from 1 of their IRAs, among other minor sources of income. They make just enough to have some of their "provisional income" reach into that second threshold of calculations for how much of their Social Security will be taxable. But they still ultimately land in the 10% marginal tax bracket it seems.

We're considering conversions from their TIRAs to their RIRAs. Just a relatively small conversion, it seems, pushes them into the 15% marginal tax bracket. This is among the factors clouding my analysis thereafter. I've got a (hopefully error-free) spreadsheet I'm using to study multiple scenarios. Like taking no conversions ever, and only RMDs thereafter for both mom (starting 2017) and dad (been taking them for a few years now). Or like converting everything in two big chunks, one this year and another next year, before mom's RMDs start. And a few others.

But I'm getting lost in the scenarios to test, because I can come up with so many (including taxes at the beneficiaries' rate in the future). This can get highly detailed and sophisticated (and thus perhaps out of my reach). But am I getting too complicated. Is there a "sweet spot" scenario or two that I should be seeking? Like Alan, on a recent thread, referred to converting up to near the top of the 15% marginal bracket. But does that still apply if they're currently starting in the 10% bracket for (likely) this year and next year before mom's RMDs kick-in?

And, at some point, is the extra "cost" of a conversion (via higher taxes due to the conversions) potentially worth it, if the funds end up in a Roth, with maximum flexibility and tax-free status?

 

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