To convert to Roth, over the next few years or never?
Hi,
I have a question about converting my 401K funds to a Roth funds. These funds will not be used for ~12 years. Should I convert those funds over the next few years or never? If I convert over the next few years, they would mostly be converted in the 22% tax bracket. If I don’t convert, these would be my RMD funds at 72 and would be taxed at the 12% tax rate.
Should I convert now (a little every year) at 22% and let it grow tax free for 12 years OR don’t convert and let the traditional IRA grow for 12 years and start withdraws as my RMD and they would be taxed at 12%?
Thank you!
Permalink Submitted by Alan - IRA critic on Wed, 2022-02-16 01:57
Your current marginal rate for a conversion is easy to determine, but your rate in retirement if you do not convert is just an educated guess. If you are quite sure that your marginal rate in retirement would be only 12%, the conversion costs you more than it is worth, and you probably should not convert.