- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Roth conversion strategy &:taxes
Posted on 5/11/26 at 2:15 pm
Posted on 5/11/26 at 2:15 pm
Does this Roth conversion strategy make sense? I'm thinking of converting to top of 24% bracket ($403k +$32k standard deduction). I'm currently only near top of 12% bracket and pay zero LTCG on ~15k qualified dividends. If I convert $300-350k my taxes on that would be roughly $70k. (I don't have that cash sitting around but plenty of equities in taxable brokerage)
If I convert in December 26, and pay estimated quarterly taxes by Jan 15, I can sell shares in January 27 when I figure I'll be back in the 12% bracket and pay zero LTCG on most if not all of the assets I'need to sell. Or, if I withold 100% of 2025 taxes could I wait until April 27 to pay the conversion tax and still face no penalty?
I'm doing this to manage future RMDs and reduce risk of paying much higher tax rates later due to widow penalty. Plus, heirs are likely to inherit these assets in their higher earning years if we live long enough. My income won't go down much due to pension w inflation adjustment and SS. I want to get this done now in early 50s before IRMAA and potential for an inherited traditional IRA with 10 yr distribution. Not to mention future tax rates may very well go up.
What am I missing?
If I convert in December 26, and pay estimated quarterly taxes by Jan 15, I can sell shares in January 27 when I figure I'll be back in the 12% bracket and pay zero LTCG on most if not all of the assets I'need to sell. Or, if I withold 100% of 2025 taxes could I wait until April 27 to pay the conversion tax and still face no penalty?
I'm doing this to manage future RMDs and reduce risk of paying much higher tax rates later due to widow penalty. Plus, heirs are likely to inherit these assets in their higher earning years if we live long enough. My income won't go down much due to pension w inflation adjustment and SS. I want to get this done now in early 50s before IRMAA and potential for an inherited traditional IRA with 10 yr distribution. Not to mention future tax rates may very well go up.
What am I missing?
This post was edited on 5/11/26 at 2:16 pm
3
Posted on 5/11/26 at 2:26 pm to TorchtheFlyingTiger
I'm 51 and this is my first year doing Roth conversions. My plan is to do them for the next 8 years or so and stay at the 12% rate. I can't speak to the widow penalty, but am I missing something with the RMDs? Or do you just have a lot more in your 401ks and you'll need more than 8 years?
Posted on 5/11/26 at 2:35 pm to TorchtheFlyingTiger
You might want to google "safe harbor" tax payment rules. If you will have paid an amount greater than 110% (I think) of your total 2025 taxes by Dec. 26, then you won't owe any penalties and can wait until April 15th to pay those taxes. The first part of the year is usually stronger for the market. If you are still working, you can increase your withholding to meet the Safe Harbor amount. Also, tax loss harvesting if you have any losers you want to sell.
Posted on 5/11/26 at 2:53 pm to Sho Nuff
I do have a long runway with 12 years before IRMAA is calculated based on income at 62. But if I stay under the 12% bracket that only gives me $30-50k conversions/yr and growth in traditional IRAs is out pacing that. Plus at any given time, one of us could die and the survivor gets stuck in single bracket with no room to convert below 22-24%. Also thinking I want to get it done so I can free up more space to spend from taxable to increase lifestyle without exceeding 12% bracket and triggering LTCG. That said, voluntarily paying 24% bracket doesnt sit well. But I know if I dont pay it now I'll almost certainly hit 24% later and also IRMAA, NIIT etc... At that point, all LTCG and qualified dividends would be taxed during distribution years instead of a handful of conversion years.
I tried Bolden trial but it didnt do much to make the optimal strategy clear.
I tried Bolden trial but it didnt do much to make the optimal strategy clear.
Posted on 5/11/26 at 2:59 pm to TorchtheFlyingTiger
quote:
Plus at any given time, one of us could die and the survivor gets stuck in single bracket with no room to convert below 22-24%. Also thinking I want to get it done so I can free up more space to spend from taxable to increase lifestyle without exceeding 12% bracket and triggering LTCG. That said, voluntarily paying 24% bracket doesnt sit well. But I know if I dont pay it now I'll almost certainly hit 24% later and also IRMAA, NIIT etc... At that point, all LTCG and qualified dividends would be taxed during distribution years instead of a handful of conversion years.
Makes sense. I've also been thinking about going higher one year or two as well because yes I will need to start selling equities to live and I want to be able to do it w/o LTCG tax. I was thinking of alternating years or just doing a smaller Roth conversion. But then I start approaching 60s with my 401k growing more as well.
This post was edited on 5/11/26 at 3:00 pm
Posted on 5/12/26 at 12:36 am to TorchtheFlyingTiger
quote:
Or, if I withold 100% of 2025 taxes could I wait until April 27 to pay the conversion tax and still face no penalty?
Safe harbor rule already mentioned (110% 2025 per this level AGI).
Just drove in from out of state…so pardon my crossed-eyes if I missed anything here. This scenario caught my attn:
In your withholding scenario, withheld taxes in your conversion are depriving the Roth (by the tax amount) of its after-tax compounding potential. Therefore, this would present an opportunity cost for your heirs’ inheritance in a very favorable Roth account (10-yr / tax free! If held > 5yrs), especially if at their high tax bracket time of career).
Fund Roth 100%
Might it make sense to pre fund your conversion taxes (eg, any room in LTCG space now?) from your taxable account equities to ensure 100% conversion to Roth?
Or ‘worst’ case even, a 15% LTCG might be FAR cheaper than the opportunity cost for withholding taxes from the Roth during conversion.
…for thought (if I’m reading your idea clearly)
This post was edited on 5/12/26 at 12:57 am
Posted on 5/12/26 at 7:13 am to Everyday Is Saturday
I should have been more clear, the withholding is from pension and part time job. I wont be witholding from the conversion. As you pointed out, that would be inefficient plus I think I'd be subject to early withdrawal penalty.
Posted on 5/12/26 at 10:42 pm to TorchtheFlyingTiger
Do you plan to use a CPA or tax projection tool to calculate your taxes owed (to avoid underpayment penalties)?
We will be doing similar 24% bracket Roth conversions starting in 2027. Safe Harbor is not efficient for us as we had large retirement NQ lump sums in 2026 that have us in sky high tax bracket in 2026. Will use 90% of current year taxes owed in 2027.
As of now planning to convert quarterly and will accelerate if market downturn, thinking will use CPA, especially for 1st year (until I get comfortable in the conversion rhythm, so to speak).
We will be doing similar 24% bracket Roth conversions starting in 2027. Safe Harbor is not efficient for us as we had large retirement NQ lump sums in 2026 that have us in sky high tax bracket in 2026. Will use 90% of current year taxes owed in 2027.
As of now planning to convert quarterly and will accelerate if market downturn, thinking will use CPA, especially for 1st year (until I get comfortable in the conversion rhythm, so to speak).
This post was edited on 5/12/26 at 11:44 pm
Posted on 5/13/26 at 6:24 am to Everyday Is Saturday
I think mine will be simple enough. No need for CPA, assuming I understand safe harbor correctly. We got a decently large refund this year so I know my withholding on pension and part time income should exceed 110% of prior year taxes. I'll confirm that toward end of the year with a simple tax estimator tool like the one on AARP 1040 tax estimator
Or, I may just go ahead and pay estimated quarterly by Jan 15 2027 and get it over with. That will alleviate any worry about a market correction between time I convert and when I sell shares from taxable brokerage to cover taxes.That's safer strategy now that I consider it instead of waiting until taxes are due just to potentially get 3 more months of gains.
Or, I may just go ahead and pay estimated quarterly by Jan 15 2027 and get it over with. That will alleviate any worry about a market correction between time I convert and when I sell shares from taxable brokerage to cover taxes.That's safer strategy now that I consider it instead of waiting until taxes are due just to potentially get 3 more months of gains.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News