Roth IRA conversion from a teacher’s retirement account
How best for a (single) just-retired teacher to convert all or much of her teacher’s retirement account into a Roth IRA, with minimum tax burden? She plans to continue working as a substitute teacher, but only about 2 days a week, and to delay applying for Social Security for several more years.
Permalink Submitted by Alan - IRA critic on Sun, 2015-08-09 00:08
Why does she want to convert? Is her projected tax rate after retirement higher than what she will pay for the conversions? If so, it will probably only be higher if she converts small amounts each year, as a large amount will increase her tax rate above what her probable rate will be in retirement. In most, but not all cases, small incremental conversions before SS benefits begin or RMDs begin can be done at a lower tax cost. And any taxes on the conversions should be paid from her other funds, not withheld from the plan distribution.
Permalink Submitted by Ben Meyer on Sun, 2015-08-09 02:22
Is this a 403(b) plan? If so, there may be state tax considerations that differ from federal. What state is it?