IRA pay as you take or Roth conversation
I took tax break by putting my retirement in an IRA. I am now 70 and I am not convinced to take my $1,000,000 and convert to a ROTH. I have my chicken money. RMD’s will hit in a few years. I don’t want a conversation to increase my income in a large sum. I’d rather pay tax as I with draw monthly. So tell me the pro’s and con’s on how to manage my 4O1k/IRA (my retirement money-no penalty) I do work with Fisher investments. Thank you
Terry Says
There are a lot of drawbacks to a Roth Conversion — and you’ve hit on the big one: immediate tax hit. Also, that hit will surely increase your Medicare monthly premiums on parts B and D, as I’m sure your advisor warned you. (If not, find a new advisor).
You might be interested in this article that details all the complexities, and provides independent review of the consequences of a Roth Conversion. https://www.terrysavage.com/roth-conversions-2/
However, just in general, I’d avoid a Roth conversion at this point. First, you don’t have that long — or want to take much risk — to make the future tax-free growth a key advantage.
Second, you’re probably going to need some of that retirement money to spend during the coming years. So why not just take the RMD, pay the ordinary income taxes at the time, and use the money as needed.
