Roth conversion and RMD

[SilentBirdHunter]

I am five years off from age 73 and RMD which would be high due to a large 401k.

My mom died this past year at age 102 and the plan is to use the inheritance for a Roth Conversion.
That would reduce my tax liability in later years when RMD kicks in and some tax free inheritance when we die.

What factors should I consider with Roth conversion beside potential increase in Medicare IRMAA bracket,
the five year rule, and increase from 12% to 22% tax bracket this year?
Thanks.

 

[jrabq]

I am five years off from age 73 and RMD which would be high due to a large 401k.

My mom died this past year at age 102 and the plan is to use the inheritance for a Roth Conversion.
That would reduce my tax liability in later years when RMD kicks in and some tax free inheritance when we die.

What factors should I consider with Roth conversion beside potential increase in Medicare IRMAA bracket,
the five year rule, and increase from 12% to 22% tax bracket this year?
Thanks.

I'm about the same age and in similar circumstances. The factors you mentioned are the ones I'm familiar with at the federal level, there might be a few more depending on what state you live in. In my case (NM) there is an additional hit in that Social Security becomes taxable once you cross an income threshold that's not all that high . I did a partial conversion last year and was planning to do another at the end of this year, but now reconsidering since the current tax rates are likely to be extended. The possible elimination of SS tax is also a wildcard that might make delaying the decision a wiser move, but who knows?

 

[Forkyfinder]

One thing - might be worth residing some other state without income tax if you dont already for the conversion.

 

[SilentBirdHunter]

I'm about the same age and in similar circumstances. The factors you mentioned are the ones I'm familiar with at the federal level, there might be a few more depending on what state you live in. In my case (NM) there is an additional hit in that Social Security becomes taxable once you cross an income threshold that's not all that high . I did a partial conversion last year and was planning to do another at the end of this year, but now reconsidering since the current tax rates are likely to be extended. The possible elimination of SS tax is also a wildcard that might make delaying the decision a wiser move, but who knows?

A couple other advantages...heirs inherit the money and don't have to pay taxes on it.
No RMD on Roth accounts, not required to start withdrawals at age 73.