roth conversion
I have a client that has 2,200,000 in his IRA, he is 62. He withdraws and has a pension of over 100k. He can reduce the amt he w/d to keep it under 100k to be eligible for a roth conversion. He wants to know how this would benefit him by doing it now or waiting until 2010. He has 600k in a stock account that he could liquidate to pay tax but is reluctant to do so. Could he benefit by doing a conversion now?
Permalink Submitted by Alan Spross on Sat, 2008-04-12 00:50
If his pension is over 100k, where is the negative income coming from that will reduce the modified AGI to under 100,000 for 08 and 09?
With his asset base, a conversion plan will require a very detailed analysis of his entire financial profile. The plan would develop an optimum amount to convert each year including 2010, where he would opt out of the two year deferral of taxes so that he could use up his lower brackets each year for conversions. Being able to convert in the two years prior to 2010 would provide more years for tax free growth in the Roth as well as more years of his lower bracket, whatever it is to be used.
Being over 59.5, there will be no penalty on tax withholding if he chooses after careful analysis to pay the taxes out of the conversion. This is no different than paying taxes from his taxable funds, then running short there eventually taking a taxable distribution from his TIRA to replenish those funds.