@jonic wrote:
Yes IRMAA (and higher tax bracket) is why I would try to spread out the conversion over several years, rather than doing it all in one year. Well that and having to pay the tax all at once! The only way I would take out the earnings would be if I cashed out everything at once which would be very unlikely. Thanks!
You're at the point where a financial planner will be a good investment. Let me give you two ideas that are putting my own thoughts on a roller coaster.
1. Withdrawing too much money from an IRA will also make your SS benefit more taxable (to a point), so the effective tax rate on an IRA withdrawal can be much more than the standard 15% or 22% rate. Because Roth IRAs are not taxed, they do not have this effect. So you could withdraw say $10K per year from a traditional IRA, and infinite funds from a Roth IRA, and never pay income tax again. That argues for moving your assets to Roth accounts as much as practical.
2. However, suppose you some day need long term nursing care under medicaid. You have to spend all your "assets" before you can get Medicaid to cover your needs, and there is an entire field of elder law devoted to figuring ways to protect your assets so you can pass them to your family. A traditional IRA is not a Medicaid "asset" as long as you use the RMDs to partially offset the cost of your care. This leaves the balance for your family. But a Roth IRA has no RMD, therefore most states consider it an asset and you would have to spend your entire Roth IRA before you would qualify for medicaid. So an asset mix that is heavy into Roth IRAs can hurt you if you lose the long term illness lottery.
(It's tough to think about this, especially at only 60, but my mom recently passed from Alzheimers and required residential care at the end. My parents had done the proper planning, and my Dad has done the right planning for if and when something happens.)
Anyway, deciding how to hold your retirement assets and in what amounts has a lot of variables, and if you pay for a planner now, you can consider that an investment of sorts because it will possibly save you money in the long run.
Cheers.
