ROTH Conversion

[khowarter]

I am retiring this year and my earnings put us in the 22% tax bracket.  I wil be required to take a distribution from my IRA/401k next year, my wife has 2 more years before she needs to take a distribution.  Our Financial Planner has recommended that we convert some of our IRA money to a ROTH IRA this year.  We have about $5k estimated refund coming for 2023 when we file our taxes which would cover the taxes on $25k.  Does it make sense to convert enough to offset the $5k refund?  Or should we leave it alone?  In 2024 we should be in the 12% tax bracket.

[Paul_W1]

Hello khowarter,

Welcome to today's ask the expert event.  Glad to have you.  It is my understanding that you have a question about a ROTH conversion.  A conversion will be a taxable event which will generate a 1099-R from your financial brokerage firm holding that account.  The rule is 20% federal mandatory withholding.  In my reading of your question, you provided around $5 for paying the taxes which leads me to believe that you have a conversion of $25k.  Without know more specific on additional income sources, this one piece would appear to be on target with your assumptions.  I can better assist you with Turbo Tax estimator called TaxCaster.  Here is the link.  https://turbotax.intuit.com/tax-tools/calculators/taxcaster/ .  This estimator is helpful as you input other income sources.  This will help your future tax planning as well.  Unfortunately we cannot offer tax planning.  Hopefully the information I have provided is helpful.  Thank you for allowing me to assist you with your question.  Have a great rest of the day.