back door to Roth ira
i am 67 years single old women who is not on ss yet, i recently roll over my 403 b into IRA substantial amount with conversion in mind into ROTH ira. i am thinking to make Ira conversion into ROTH before i need to take my RMD which is going to be after 6 years,
is it this action good move toward tax stand point.
thank you
Permalink Submitted by Alan - IRA critic on Thu, 2020-10-22 00:22
It is a good decision if you can convert at a marginal tax rate that is less than or sometimes not more than your expected marginal rate after RMDs and SS begin. Since you are not yet receiving SS and RMD income, your current rate is most likely to be less than after this income begins. This is particularly true if you have room left in the 12% bracket since the next bracket up is 22%. If you fall into this situation, you would likely do modest conversions every year until SS begins (age 70 max), and perhaps smaller conversions in the next couple years after SS begins and prior to RMDs starting. But it will take some annual calculations to determine how much to convert each year. Once RMDs start, any conversions would likely cease.
Permalink Submitted by Bruce Steiner on Sun, 2020-11-08 21:58
You would generally convert to the extent you can at a tax rate less than, equal to, or a little higher (but not too much higher than) the tax rate that would otherwise apply to the distributions.