Roth IRA Conversion Sweet Spot

Usually, a problem with doing a Roth IRA conversion during a client's working years is that the taxable income from the Roth conversion, when added to other income, could push a taxpayer into a higher income tax bracket. [...]2018, married couples with taxable income between $240,000 and $320,0...

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Bibliographic Details
Published in:Trusts & Estates 2019-06, p.30
Main Author: Hoyt, Christopher R
Format: Article
Language:English
Subjects:
Beneficiaries
Capital expenditures
Conversion
Couples
Deferred compensation
Deferred income
Deferred income taxes
Estate taxes
Income taxes
Individual retirement accounts
Inheritance taxes
IRA
Low income groups
Medicare
Retirement plans
Roth IRAs
Tax planning
Tax rates
Taxable income
Taxpayers
Wealth
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Summary:Usually, a problem with doing a Roth IRA conversion during a client's working years is that the taxable income from the Roth conversion, when added to other income, could push a taxpayer into a higher income tax bracket. [...]2018, married couples with taxable income between $240,000 and $320,000 had been subject to a 33% marginal tax rate on every dollar of income in that range. [...]2018, people who made a Roth IRA conversion were able to undo the conversion with a recharacterization, thereby permitting them to try and do a Roth IRA conversion in a future year when stock prices might be lower. 18 After 2017, Roth IRA conversions are final and can't be reversed. [...]Congress enacted a 10% penalty if an individual under age 59 1 /2 receives a converted amount within five years of a Roth IRA conversion. 29 The 10% early distribution penalty that typically applies only to a distribution of taxable income from a traditional retirement plan will also apply to a distribution of a tax-exempt Roth IRA conversion amount made to an individual under age 59½. IR-2018-211 and Internal Revenue Service Notice 2018-83; 2018-47 IRB 1 (Nov. 1, 2018). [...]2010, a Roth IRA conversion was prohibited if an individual's modified adjusted gross income (MAGI) exceeded $100,000.
ISSN:0041-3682