Converting assets in retirement

[Susan91]

I plan to retire in 4 years. I have a 401k, a Roth, a regular IRA and a brokerage account. How do I determine whether to convert some of my assets--and whether I should do it now or later? How can I calculate the tax consequences of various scenarios so I can make the best decision?

[DawnCo · Accepted solution]

Hi Susan91,

Thanks for joining the event today.

Getting ready for retirement requires a lot of planning.

This is a very complicated matter. I would definitely enlist the help of a certified financial planner to help manage your transition. 

     Understanding which assets are pre-tax investments and post tax investments is important.

A Roth is post tax and no tax consequence for you.  you pay no tax on the money you withdraw or on any of the gains your investments earned. That's a significant benefit. Most people use this for extra expenses unforeseen etc, to not increase taxable income when withdrawn.

Traditional IRA: You can convert Traditional IRA to Roth in increments each year to free up pre-tax money and minimize tax consequences

The 401K would be withdrawn in increments to manage tax liability  throughout retirement.

Looking at tax brackets can help you decide how much to withdraw at a time: Here is a tool for that.

https://turbotax.intuit.com/tax-tools/calculators/tax-bracket/

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/