Convert Traditional IRA to Roth
I am 65. I work and collect SS. I contribute a part of my SS income to a Traditional IRA I started in March of this year with Vanguard. I contribute the amount above $6,000.00 to a taxable account.
I am in good health and enjoy my work. I plan on working past age 70.5 and I want to convert so that I may continue to make contributions. I anticipate working until I am 75.
Should I convert now when the account is small or wait until I’m 70?
Permalink Submitted by Alan Spross on Mon, 2008-09-08 01:27
Conversions to a Roth IRA have no bearing on whether you can make regular contributions to a Roth. Since you are over 59.5, it does not matter whether you make regular Roth contributions or regular TIRA contributions coupled with Roth conversions. You can continue to make Roth contributions with no age limit as long as you have earned income.
To the extent you convert prior to age 70.5, your RMDs will be reduced, but you also should be careful not to convert a large enough amount so that your marginal tax rate increases.
If you make more than 13,500 or so prior to age 66, you lose some of your SS benefit via the earnings test. Separate from the earnings tax is the issue of SS taxation of the SS income that you do not lose. Conversion may increase the amount of your SS income that is included in your AGI, and in addition based on your marital filing status and income, the deduction of your TIRA contribution can be affected by receiving SS benefits if you are covered by an employer plan. If your total income is fairly low, some of these complex interactions can be avoided, but I wanted to at least indicate that you may run into some of them.