Ask Terry Questions Converting Traditional IRA to Roth IRA after early retirement

Converting Traditional IRA to Roth IRA after early retirement

By Terry Savage on October 08, 2015 | Financial Planning / Retirement

I’m 59, retired, with over $1.2 million in a traditional IRA. I’m interested in the pros/cons of converting some/part/all of my traditional IRA to a Roth IRA. I know I would have to pay income taxes on any money I convert to a Roth IRA but does having the tax free withdrawal advantage now outweigh keeping my traditional IRA and paying taxes on withdrawals when I turn 70 1/2.

I know a lot depends on my current and anticipated tax brackets but since I’m retired and don’t plan on working again, am currently living off savings (I have enough to last until at least age 70+) have no significant income to report for tax purposes and plan on waitiing until I’m 70 to take Social Security does it make sense to consider a conversion?


Terry Says:  It certainly makes sense to convert a portion of your traditional IRA to a Roth each year, since the money can keep growing tax-free in the Roth.  So here’s the tricky calculation and your accountant or Certified Financial Planner should help you decide how much to convert each year.  First, you have to figure out how much to take out without moving you into the highest tax bracket.  But second, since you will be using money held OUTSIDE your IRA to pay the taxes, you have to figure out how much of a dent this will make in your plans to live on your savings until age 70-1/2.  And these are not straight match questions — because you have to factor in the earnings you will lose on the savings you use to pay the taxes!

This is just a guess, but I’m thinking that the best choice would be to continue earning more money now, at least for the next couple of years, so you can save even more money.  And then delay the process I’ve just described above.  It always seems you will have “enough” money until you factor in health insurance costs, and other variables.  And you might want to purchase long-term care insurance, just in case.   These days it costs nearly $100,00/year for that kind of “custodial care”, which we all hope we won’t need.  But you never know.  That would be another cost to consider.

Finally, a lot depends on the “social” aspects of your situation.  I don’t know whether you have a spouse or family to consider, but I do know that if you’re a male you have a life expectancy of at least 30 years!  A lot can happen in that time, and you’re not leaving much of a cushion.  So my last suggestion is to consult a certified financial planner to run all these numbers. Fine one at

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