Retirement IRA’s and 401K’s
My wife and I are retired. We are lucky enough to have 3 IRA’s and 2 – 401K’s and have now been forced to take RMD’s. I have listened to portions of Ed Slott’s presentation where he says transfer all taxable plans to non-taxable plans. We’d like your opinion and guidance on this. I think that if tax rates stay the same we should just incrementally pay our taxes on our RMD’s in the year we receive them. Do you think we should recharacterize them at all to Roth IRA’s and Roth 401K’s (, if yes, maybe one every year to spread out the tax “hit”) ? I think you get the gist of my question.
Of course, the problem is not knowing where tax rates are going. Please advise. Thank you. We been listening to you for years whenever we can.
Terry Says
This is political speculation, not market speculation! We cannot know what tax rates will be in the future. You can make an educated guess that with huge deficits, it’s likely some politician will raise tax rates. On the other hand, the worst time to convert a traditional IRA (and pay the taxes) to a Roth IRA is at the TOP of the market. Think about it! You’ll pay taxes, and then the value of the portfolio drops if the market falls.
So now you have two things to consider: tax rates and whether we are at/near a top in the market! I’ll leave you to figure that out!
