Roth Conversion for Spouses
Two spouses, ages 60 and 65 who file their taxes jointly. The 65 year old spouse has a $350k traditional IRA, and the 60 year old spouse has a $50k traditional IRA. They both have small Roth IRAs.
They’ve decided to do a $50k roth conversion for 2024. Is it preferable to convert funds from the older spouse’s larger IRA, given she is closer to RMD age?
I recognize it doesn’t make a difference for tax purposes for 2024, but wondering if it is a general rule of thumb to first convert the older spouse’s account, particularly when there is a 5 year age gap like this.
Permalink Submitted by BruceM on Tue, 2024-12-10 18:34
That is one factor to consider. The other factors are their first RMD year, which for the 65 year old will be 73 (born 1959) and the 60 year old will be age 75 (born 1965), meaning she has 15 years to her first RMD while he has 8 years.
But the over-riding concern will be when they plan on beginning Social Security. Generally, the best time to do a Roth conversion is after retirement has begun (no or little earned income for the year) and Social Security and a pension (if applicable) have not started. For most, this may be a year or two with little household income so a big Roth conversion at least to take them to the top of the 12% tax bracket, would need to be considered.
Permalink Submitted by Matthew Ottusch on Tue, 2024-12-10 21:14
Yeah, they haven’t yet started taking SSI.
So, all other things being equal, it would make sense to beginning to convert the account that is closest to RMD age, correct?
Permalink Submitted by Matthew Ottusch on Wed, 2024-12-11 10:13
Okay.
Let’s assume we do the $50k the conversion in the older spouse’s account. That spouse also has a inherited IRA subject to the 10-year rule that must be emptied by 2031. Should we take the tax withholding from the inherited IRA, since it needs to be emptied out anyway? If so, does this additional “income” effect the amount we should convert?