In order to do a Roth conversion without pushing you to a higher tax bracket is you need to have enough after tax money saved so you could live of it while you are doing a conversion. If I want to stay within 24% bracket, the most I could convert per year is around 150k with my SS. I would then need to withdraw from my after tax account for my day to day expenses. For people with a lot of other income - dividends, rental income, pensions, etc. then it may not make sense to do the conversion.
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Yes, and they have made, right or wrong, a reason for the lower level.
They say wealth.
You all seem dubious of that.
I’m sure a Roth conversion won’t work for me but enough talk about them, I should learn the intricacies. I once went to a dinner thing and they talk to you after and he told me - oh, yeah, that’s not for you - and they fed me a prime steak dinner in order to get my $$!!
But there’s so much talk on here that people think they are the right thing that it warrants education.
Regarding ROTH conversions: I recently listened to a podcast by Devin Carroll that approaches the question from a different perspective. He discusses WHY one might want to consider a conversion and goes over four (?) common reasons and how each help shape a path forward.
I enjoy his podcasts on various financial /retirement topics because, while he is in the industry, his free podcasts encourage me to look at things from a different perspective, and I always seem to come away with something to think about. Sometimes it confirms a choice I’ve made and other times, has me considering other options. YMMV.
Fixed spelling of Devin’s name
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If you look further back historically, the 55+ participation rate seems more reasonable, perhaps on the high side. Graphs for past 50 years are below. The first graph shows 55+. The 2nd graph shows overall. Note that I intentionally skipped 2026 because the sharp decline at start of 2026 was due to a statistical/resampling change rather than an actual change in work force.
The sharpest slope change in age 55+ participation occurs during the 2000s “lost decade”. This seems reasonable, considering how much retirement balances declined with the stock market crashes, and how much home values declined in 2007-09. However, 55+ participation remained at 2009 levels during the 2010s decade, in spite of stock market and home values increasing beyond historical norms. It wasn’t until COVID that we saw a notable decline. As has been noted participation did not bounce back after COVID. There may be a variety of COVID related effects contributing – post-COVID sharp home value increase, age 55+ deaths and health issues changing demographic, time off + WFH leading to retirement either by choice of forced, rapid new hires post COVID primarily being younger demographics, etc. I don’t think there is a single simple explanation.
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Exactly - the dot com bust killed many - both in wealth and employment.
The b4 covid to now have been glorious.
Many are anti everything happening and I didn’t see fact behind the opinion - because it was an opinion, but it seems quite realistic.
All those Harvard MBAs know how to analyze data.
Now that I think about it, you are likely correct that the population is pro Roth conversion, especially during early retirement/pre-RMD ages.
What the Bogleheads oppose is foregoing the tax deduction of traditional 401(k) contributions. I have advised my children to ignore the traditional 401(k) and instead fund the Roth 401(k), at least up to the top of the 24% bracket. They live in very high tax states, and the Boglehead crowd firmly beliefs that no one should ever forgo the tax deduction of the traditional 401(k) AND that everyone will move to no tax states in retirement. I don’t know that my children will remain in states with a tax rate as high as they are currently paying, but I don’t see them living in no tax states.
Bogleheads believe that the reason to never skip traditional 401(k) contributions is that these current 20-somethings can retire early, and then convert to Roth. My counter (in my own head) is that someone who is in the 24% bracket in his 20s will likely be in a higher bracket later in life.
In an ideal world, I wish they had access to mega back door Roths so that they could contribute to the traditional 401(k) and fund a back door Roth, but their companies do not offer that option.
Re: Your own conversion decision. I am with you…and not yet practicing what I preach, as I am still on the ACA. Once I hit Medicare age, I can pay IRMAA surcharges to convert to Roth. It’s a lot of moving pieces, especially for married people and the complete unknown of when the first spouse will die.
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It may not be the right choice for you, especially since your goal is not to maximize assets but instead to maximize cash flow. (I think you wrote something to that effect upthread.)
As I’ve commented a couple times now, the decision to convert to Roth depends on so many factors, not least of which is married vs single filing, and the tax rate your heirs will be in when they inherit. It’s impossible to know when the first spouse will pass, and when the heirs will inherit.
Single filers who have very sizable IRA balances, along with other sources of income (interest/dividends, pension, SS, inherited IRA distributions), can model their cash flow and tax rate at different periods: early retirement, Medicare enrollment, start of SS payments, start of RMDs. But even then there’s a lot of guessing involved.
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Do you remember what the common reasons may be? I am not a podcast person but I can go and see if any of Devon’s content is in written form.
Let me know if you find the pod cast in written form please.
Yes, it is a much easier calculation for those who are not married. It then comes down to do you want to pay the taxes now or allow your heirs to pay the taxes when they inherit? But even that requires a leap of faith/some guesswork because you do not know the situation your heirs will be in when you inherit (married vs single, total HHI and marginal bracket), or in your case, if they will also be New York City residents.
I did a quick search, which I think landed me on that person’s page, but then I clicked one of the hyperlinks and got a 404/not found, so I abandoned!
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This is possibly the link on YouTube
Youtube has the ability to show the transcript if you prefer to read instead of listening. I am starting the podcast now and will summarize the three later today. All 5893 (approximately) financial podcasts have between 1 and 18 episodes on Roth conversions regurgitating much of the same advice. But I’ll listen to this anyways since I’m an optimist and it may have something I missed.
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Found out pretty quickly that episode is pretty old, before the most recent tax changes. There is another episode that is more recent here, and again, youtube will create a transcript.
But in summary, you do Roth conversions to pay less taxes based on your (or your financial advisors) current guess on future income, future tax rates etc.
Personally, I converted last year and this year because I am in a low tax bracket (under 22) and may need the money in 5 years, allowing me penalty free access at that tiime (look up Roth Conversion ladder). The biggest benefit of a ROTH IRA is the flexibiility to control income relative to spending. There will likely be a year when you get an outsized benefit by pulling some % of you spending from a Roth to avoid ACA and IRMAA cliffs.
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I don’t believe that to be true.
I have read many posts on BH recommending the same. (Its one thing I learned from experience and wish I had done when I had a very low tax bracket starting out.)
This, I have not seen, but can understand the theory.
That’s one of the beauties of the free OpenSocialSecurity program. It uses mortality tables – which you can change, depending on your health status – by month in its cash flow calcs.
Had a discussion with my H today.
We haven’t spent a lot this year as we anticipated doing some renovations but are having a tough time getting the contractor we want to get us on the schedule
I told him that this was a good year to do a Roth conversion. We will reevaluate at the end of the year depending on if we can get our renovations on the calendar
As long as one of us is still living, we should be fine for IRMAA. The issue will be when one of us has to file as a single.
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Among them were wanting to leave tax free inheritance to beneficiaries, mitigate the survivor/widow tax burden, to have more types of income available (I think I’ve got this one a bit off, but the idea being to have pre-tax, post tax and tax free income sources to chose from.)
But what I really got out of the presentation was to figure out why you are considering conversions before deciding to do any. The fill the tax bracket is a how, not a why.
When I just followed the link from my email invite, it appears that this has gone private. It was new as of July 7th.
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Thanks for taking the trouble to look for that.
My sense is that I probably wouldn’t learn anything that I don’t already know, so I doubt I will try to watch this, but I sincerely appreciate you taking the time to find it.
Thanks!
Yes, leaving tax-free inheritance to beneficiaries and managing the widow tax brackets are two reasons I’ve mentioned in my far too many posts on this thread (mocking myself here for overposting!). I’m guessing they also mentioned looking at your own marginal tax rate versus your beneficiaries’ tax rates. If you can convert in the 24% and your children are in the 37%, they will enjoy more of your inheritance.
I definitely agree that it is important to understand why one would be converting as opposed to just blindly converting.
Thanks again!
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Let me phrase this another way. Some encourage Roth contributions up to maybe the 12% bracket, but many are opposed to young grads going all Roth. Some will suggest contributing to the 401(k) up to the employer match, and then Roth IRA to the extent possible. I guess we’ve just been reading different threads?
And that might be coming from the FIRE contingent? But again in my head I think that 20 something year-old in the 24% bracket will most likely go on to earn considerably more, thereby making future Roth 401(k) contributions more expensive/less palatable (b/c of the higher tax bracket, so then pivot back to traditional 401(k) contributions). These same young high earners will most likely be in a higher bracket in retirement also.
P.S. I am not sure if I did this quote thing properly.