Conversion of traditional IRA to Roth IRA

Submitted by alberto vega on Fri, 2023-08-18 23:40

Married person age 72 in 2023 is thinking to convert a $100,000
as of 12/31/22, traditional IRA to a Roth IRA in 2023 or 2024
Questions:
1. It is expected the individual’s tax bracket in 2023 will be lower than in 2024.
Therefore will the conversion to a Roth be better in 2023 than in 2024?
2. After conversion to a Roth, if the person does not take distributions, then
there will never be a federal income tax on this account. The only income tax will be on the
converted balance from traditional IRA to Roth IRA in the year of conversion.
3. If the conversion to a Roth occurs in 2023 will the individual have to wait
5 years in order to avoid future income taxes on both the principal and interest withdrawals
that are planned to occur in 2028
4. Under current law if the conversion to Roth is done in 2023 and withdrawals start in 2018
such amounts will not be taxed but will have to be reported in FORM 1040 line 4a but $0 on line 4b.



Submitted by Alan - IRA critic on Sat, 2023-08-19 00:12

  1. Yes, better in 2023 than 2024, and perhaps better than beyond that since RMDs from any non Roth accounts left start in 2024.
  2. Correct if there are no non Roth retirement accounts left.
  3. If this is their first Roth contribution, the amount converted (100k) can be withdrawn anytime tax and penalty free. But any earnings will have to wait until 2028 to be tax free.
  4. For distributions after 2027, the Roth will be qualified and you are correct that distributions would only be reported on line 4a of Form 1040. For any distributions before 2028, Form 8606 will be needed and the balance of conversions (100k) would be shown on line 24 for the first distribution before 2028.


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