Roth Conversions
Dear Terry,
I have read your column and watched the video on this subject. I’m prepared to buy the software that will give me a more definitive answer. I just want to make sure that, because of our age, this particular ship hasn’t already sailed without us.
I am 75 with a 600,000 regular IRA. My husband is 76 with 1.2 million in a 401K. We also have around 88,000 in a money market. I’ve already taken my 2026 RMDs. My husband hasn’t taken all of his. We own a brick Chicago 2-flat worth at least 500,000 free and clear. We both have pensions and social security, although mine is considerably reduced as at least half of my work years was in public education. We have no credit card debt. We owe under 5,000 on a 150,000 HELOC that we keep for liquidity and as a hedge to keep a con artist from stealing our building.
As we have a reasonable expectation of living another 8 to 10 years, is it a reasonable idea to convert some or all of our investment into Roth IRAs?
Terry Says
One thing you didn’t tell me: When you die, who gets the money in your IRA? If it’s your children, under current law they can extend the tax-deferred growth of the account for at least 10 years! And it looks like you might not need to spend all of it.
Oh, wait –do you have Long Term Care Insurance? That’s the one thing that could necessitate extra withdrawals.
But without doing the calculations, my personal opinion is why do the conversion now when it will definitely raise your Medicare Part B and D premiums for a while, when you don’t think you’ll be in a higher tax bracket later, when it means giving up liquidity to pay the taxes now — It just doesn’t make sense to me.
I think you’re getting too cute! Just be sure you’re conservatively invested INSIDE your IRA at this stage.
