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Good time for Roth conversion?

2,299 Views | 12 Replies | Last: 4 yr ago by b0ridi
GE
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8:55a, 3/26/20
AG
Seems like it could be a better time than ever for a Roth conversion for many people:

- Earnings for 2020 for many people are expected to be reduced pushing into a lower tax bracket than usual (or at least allowing more room within current tax bracket for converted funds)
- IRA or 401K is way down so the amount of dollars converted will be less lowering tax burden
- Taxes on the conversion won't be due for a year and a month

Surely I'm missing something here, it just seems like a great opportunity for those having a down year.
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Baby Billy
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9:42a, 3/26/20
AG
Not missing anything
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JSKolache
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9:52p, 3/26/20
AG
Also good time to front load a roth. Move cash over now and buy some dividend stocks lowwwww
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OldArmyBrent
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10:42p, 3/26/20
AG
And don't you get a chance to unwind it if value continues to go down?
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EliteZags
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5:22a, 3/27/20
AG
already been considering this but if the 1st point of lowered income isn't there, would it still be worth it for any amount? I have 6 figure amount eligible and any conversion I make will be in the 24% bracket
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GE
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In reply to EliteZags • 7:19a, 3/27/20
AG
EliteZags said:
already been considering this but if the 1st point of lowered income isn't there, would it still be worth it for any amount? I have 6 figure amount eligible and any conversion I make will be in the 24% bracket
I don't know. The way I have been thinking about it is in terms of the conversion investing an additional amount at this low market point but not sure if that's the right way to think about it. Not sure whether the straightforward question of rate now vs. rate at distribution time can be applied directly.
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nactownag
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7:25a, 3/27/20
AG
I did some at 18,500. Will do more if it continues to drop.
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Civen
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In reply to EliteZags • 8:06a, 3/27/20
AG
EliteZags said:
already been considering this but if the 1st point of lowered income isn't there, would it still be worth it for any amount? I have 6 figure amount eligible and any conversion I make will be in the 24% bracket
I'm in the exact same spot. I haven't pulled the trigger yet, but it is tempting.
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GigEm81
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11:51a, 3/30/20
AG
It is a good time if you are in a low tax bracket compared to when you otherwise expect to do the conversion. Otherwise, it is no better than any other future time, despite intuition.
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Civen
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In reply to GigEm81 • 1:12p, 3/30/20
AG
GigEm81 said:
It is a good time if you are in a low tax bracket compared to when you otherwise expect to do the conversion. Otherwise, it is no better than any other future time, despite intuition.
I gotta admit, I don't see the reasoning behind this statement.

Obviously, if you're in a lower tax bracket right now it's a good time. But even if you're in the same bracket, it should give you some benefit. Paying taxes on 10 shares @ $50 is going to be a lower bill than 10 shares @ $100. Am I missing something?
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GigEm81
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In reply to Civen • 1:21p, 3/30/20
AG
Civen said:
GigEm81 said:
It is a good time if you are in a low tax bracket compared to when you otherwise expect to do the conversion. Otherwise, it is no better than any other future time, despite intuition.
I gotta admit, I don't see the reasoning behind this statement.

Obviously, if you're in a lower tax bracket right now it's a good time. But even if you're in the same bracket, it should give you some benefit. Paying taxes on 10 shares @ $50 is going to be a lower bill than 10 shares @ $100. Am I missing something?

yes. But the alternative is to wait and do it later. You are only looking at half of the equation. Unless your tax rate is lower now than in the future, there is no benefit. You have to run both cases, Roth now versus Roth later.



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nactownag
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1:57p, 3/30/20
AG
Problem is there's no way to know for sure if it's lower now. But I think it's wise to say like this...if you doubt it will be lower then why take a chance that it could be higher.
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GigEm81
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In reply to nactownag • 2:14p, 3/30/20
AG
nactownag said:
Problem is there's no way to know for sure if it's lower now. But I think it's wise to say like this...if you doubt it will be lower then why take a chance that it could be higher.

yeah, it just depends on that typed of risk you prefer.
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b0ridi
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5:08p, 3/30/20
Roth conversions will increase your AGI... which could affect your eligibility for the stimulus payment. Advanced payment is dependent on 2018/2019 AGI, but the payment will ultimately be decided by 2020 AGI. Increasing AGI could also affect other credits. Just depends on your situation.
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