Ask Terry Questions ROTH CONVERSION


By Terry Savage on August 22, 2018 | Financial Planning / Retirement

I have a substantial amount in a 401 (over 800K). Im 63 years old and retired last month.
I will be getting a pension and S/S and believe my income will be higher then it is now once I receive my RMD s in 7 years. It will sting a little now to pull out of our savings to pay the taxes but am I right in thinking Im better off paying 24 % now ? Thanks for your opinion.

Terry Says

Well, I did that with one of my IRAs a few years ago. Gosh, I hated to part with the tax dollars! But now the money is growing tax free. It’s surely possible that both rates and your income might be higher in the future, as you describe. But I hate to give the government money before I have to. So I’d suggest doing a Roth conversion with only part of your IRA rollover. And to make it easier, you might divide your rollover between two separate custodians– say Fidelity and Vanguard. Convert one of them to a Roth. You’ll always be able to tell them apart this way. And be sure to double-check your estimates of the tax you will owe — because this conversion could push you into a higher tax bracket! This is one to run by your accountant.

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