Permalink Submitted by Alan Spross on Mon, 2010-10-25 20:12
He is generally very positive about conversion benefits, but each IRA owner should complete a thorough analysis of their current and potential future financial situation before converting. While the main factor is current marginal rates vrs estimated future tax rates in retirement, there are other factors that should be included in the analysis before adopting a strategy for conversions.
Once the analysis is done, there are several different strategies that can be implemented. One popular strategy is to only convert the amount that brings you up to the top of your current bracket each year.Doing that makes it more likely that you will pay a lower tax rate on the conversion than your rate in retirement, and you will certainly pay a lower rate than if you did a large lump sum conversion.
Permalink Submitted by Alan Spross on Mon, 2010-10-25 20:12
He is generally very positive about conversion benefits, but each IRA owner should complete a thorough analysis of their current and potential future financial situation before converting. While the main factor is current marginal rates vrs estimated future tax rates in retirement, there are other factors that should be included in the analysis before adopting a strategy for conversions.
Once the analysis is done, there are several different strategies that can be implemented. One popular strategy is to only convert the amount that brings you up to the top of your current bracket each year.Doing that makes it more likely that you will pay a lower tax rate on the conversion than your rate in retirement, and you will certainly pay a lower rate than if you did a large lump sum conversion.