How do I calculate the tax I have to pay to convert Tradational to ROTH?
Dear Forum.
Converting to ROTH IRA.
I have 401(a)
401(k)
Traditional IRA
457 plan
I am 59 years old. If I convert all plan to Roth IRA, How do I calculate, how much tax I have to pay? It will be Approx 50,000
SKG
Permalink Submitted by Alan - IRA critic on Sat, 2017-04-01 18:31
You will probably have to uset a tax program to mock up your estimated 2017 return with and without the conversion. The difference is the tax resulting from the conversion. Usually, you would not convert a large enough amount to push you into a higher bracket, especially if you think you will some lower income years due to retiring before SS and RMDs kick in. Converting in those lower income years can be done at a lower cost, but you also need to estimate your tax rate in retirement to know if a conversion is beneficial at all.
Permalink Submitted by Sumit Ghosh on Sun, 2017-04-02 02:59
What is RMD’s?SKG
Permalink Submitted by Steve Hagedorn on Mon, 2017-04-03 16:40
RMDs are caclculated based on your tax deferred account balances each year after age 70.5. These distributions are taxable distributions that you must make every year after 70.5 in order for the IRS to begin collecting taxes on these tax deferred accounts.Roth IRAs do not have RMDs so your strategy to covert (and pays taxes in the year you convert) avoids RMDs later since you have already paid your taxes as part of the conversion.Since you are 59, why not spread out your Roth conversions over the next 5-10 years? This may allow you to convert at a lower tax rate, and hopefully grow these conversions tax free going forward. There are Roth conversion strategies that can help you maximize your coversions.Sounds like you need to get some additional information and better educate yourself about these dynamics.