High basis in Govt-CSRS Voluntary cont account for Roth conv
I believe the bulk of account 250k is principal and after tax. the interest is 50 $300k total. This individual has no IRA’s and I understand that this voluntary CSRS contribution is elligible for conversion. This seems like a good canadate for conversion(other factors not mentioned would make a Roth very beneficial) since most of account is basis tax would be minimized. Any thoughts?
SSj
Permalink Submitted by Alan Spross on Mon, 2010-11-01 22:51
The fact that for every taxable dollar in the conversion, an additional $5 goes into the Roth IRA, makes conversion much more attractive. If rolled to a TIRA instead, with an assumed return of 6%, the 300k becomes 600k in 12 years, just when RMDs really either begin or ramp up the person is near RMD age now. The TIRA is then nearly 60% taxable and tax rates will probably be higher then than now.
But his current tax rate vrs estimated tax rate in retirement should still be considered. Unless the current rate is considerably higher, the conversion or partial conversion at least should be considered. It can also be done incrementally including the two year deferral on any portion done by year end 2010 to further limit the marginal rate paid on the 50k.
Permalink Submitted by steve jackson on Tue, 2010-11-02 15:26
He also has a pension option if he leaves it there,roughly $2,100 month for him,$1,800 for spouse. Says he does not need the money. The Roth conversion seems to be even more beneficial since his estate would get nothing and estate planning is important to him since he has children and grandchildren. Any thoughts?
SSJ