Roth IRA

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  • jfoxcpacfp jfoxcpacfp 
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7958
    Joined: 01/09/2016

    At age 65, my typical recommendation is Roth conversions, as already referenced by @Faithful_Steward. Roth contributions are fine, too, but the impact at this point is relatively negligible. Hopefully, this person has an IRA and/or a 401k that s/he can begin converting to a Roth. At a minimum, s/he should fill out at least through the 12% bracket, maybe even through the 24% bracket, depending upon the ability to pay taxes and the tax brackets of the intended recipients.

    If the recipients will be in the top marginal bracket, one technique is for the 65-y.o. to convert through the 24% bracket and for the eventual recipients to loan the $$ at a reasonable rate of interest to pay the taxes. A clause w/b added to the LWT to ensure the taxes are repaid from the estate at death.

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    JFox—is there an easy guide or something to figure a plan for this?  I think I need to recommend this for my mom (71) who’s still working part time, they’re not taking any withdrawals aside from RMD and living on SS.  I think she only has maybe 30k in Roth and several hundred in tIRAs.   Think they’re in lowest tax bracket (living on ~75k/yr).  So should they just move convert X amount each year, but not enough to bump a tax bracket?

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    In this case, I just don’t see the benefit if she plans to spend the Roth. If she plans to leave it to kids/grandkids, my answer would change. However, they would have to be able to afford the tax hit and also not convert so much that Medicare premiums jump.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ ~ [email protected]

    #238517 Reply
    aelliscpacfa aelliscpacfa 
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 9
    Joined: 08/13/2019

    I will add another thought that may or may not be relevant.  Let’s assume you would like to employ a Roth Conversion strategy for your mother.  She might want to get started sooner than later.  The tax brackets will be more narrow if she has to file as a Single taxpayer at some point in the future.  She will be able to convert more dollars into the Roth each year during her married years.  This was relevant to me because my father passed in September 2018.

    Andrew B. Ellis, CPA, CFA, CFP

    #238819 Reply
    The White Coat Investor The White Coat Investor 
    Status: Physician
    Posts: 4482
    Joined: 05/13/2011

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #239361 Reply

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