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Traditional IRA to Roth, Should I or not

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  • Avatar onida2000 
    Participant
    Status: Physician
    Posts: 1
    Joined: 04/11/2019
    medical school scholarship sponsor

    Dear,

    Hoping you guys can guide me. I have 220K in traditional IRA. My wife will be finishing up her fellowship in July 2020. I’m 40 y/o and I’ve been practice for last 10 years and our AGI is around 500K.

    As you can imaging, once my wife will earn her full physician salary, we will have lots of tax to pay. I have been contributing and taking back door IRA advantage for my wife IRA. Not for me d/t Prorata rule and my idea was to covert my IRA traditional to Roth and start using advantage of backdoor IRA. also avoiding high taxes in the retirement.

    I have about, all tax deferred

    500k in ORP

    220k 403b

    220k in IRA

    170k in 457b

    my questions are

    1) Traditional to Roth conversion, My marginal tax bracket for conversion will be 35%. Is it worth it and if yes how do I need to do that? Should I let it grow in tradition IRA pocket.

    2) Other alternative, Should I keep my traditional IRA or direct roll over to 403b, to consolidate in one account. And then take advantage of Backdoor Roth from tradition IRA.

    thanks in advance

    #213545 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 831
    Joined: 03/09/2017

    If your 403b accepts and IRA rollover I vote for option #2 considering your tax bracket. You could run the numbers on an Excel spreadsheet but I think #2 is going to be the winner.

    #213550 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2244
    Joined: 03/01/2018
    My marginal tax bracket for conversion will be 35%. Is it worth it

    Click to expand…

    no

    Should I keep my traditional IRA or direct roll over to 403b, to consolidate in one account. And then take advantage of Backdoor Roth from tradition IRA.

    Click to expand…

    rollover pretax IRA if 403b will accept, and investment options/fees within 403b are ok, then backdoor Roth

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #213551 Reply
    Liked by Peds
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 4186
    Joined: 01/08/2016
    Earnest refinancing bonus

    No.
    Yes.

    #213555 Reply
    Avatar Financial Naive MD 
    Participant
    Status: Physician
    Posts: 30
    Joined: 05/05/2019

    1) Traditional to Roth conversion, My marginal tax bracket for conversion will be 35%. Is it worth it and if yes how do I need to do that? Should I let it grow in tradition IRA pocket.

    Click to expand…

    Absolutely not, you can’t pay for more than 35% even you earn a lot more.  If you were in 15% tax bracket, conversion may make sense.

    #213559 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7938
    Joined: 01/09/2016

    I vote no  (#2) in this situation. Now, if we were in a bear, my vote would be yes (#1). But not at AGI $500k and a happy market.

    Hey, welcome to the forum!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #213565 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1599
    Joined: 02/11/2019

    I vote for #2. That Roth is too expensive for you are that income.

    You forgot option 3. Cash it out and triple it at Turningstone.

    “Never let your sense of morals prevent you from doing what is right.”

    #213728 Reply
    DMFA DMFA 
    Moderator
    Status: Physician
    Posts: 2138
    Joined: 06/24/2016

    Roth conversions at high brackets are p much never a good decision.

    Rollover to a qualified plan. If you can’t or don’t want to do that, such as if you have a garbage 401(k) with poor choices/fees and no better options, then meh, just don’t do backdoor Roth. It’s great, I love it, but it’s not the be-all end-all.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #213742 Reply

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