Personal Finance and Investing

mahatmakanejeeves

(61,653 posts)

1. "The question is not whether that makes financial sense."

Fri Nov 29, 2024, 07:56 AM

Nov 29

Last edited Wed Dec 11, 2024, 04:00 PM - Edit history (1)

It doesn't, not with the market at an all-time high. That is, if your traditional Roth is full of stocks.

You'll pay taxes on all those capital gains, all at once. I know you say you have no choice, but that's going to take a huge hit probably. *

The best time to convert is when the value of your traditional IRA is way down. That way, you'll minimize the capital gains.

Fourth quarter estimated taxes aren't due until January 15, 2025, IIRC.

I am not a tax attorney, or any kind of lawyer.

-- -- -- -- -- --

* They are not capital gains. I ~~misspoke~~ was wrong. The people who corrected me are right.

Full disclosure: where I tripped us was, I have a Roth IRA that has some shares of AAPL. Had I bought those shares of AAPL the normal way, i.e., not as part of a Roth IRA, I would be subject to paying a tax on the capital gains when I sold them. As it is, I have already paid taxes on the money that I contributed to the Roth IRA over the years, so the increase in share price is mine to keep.

Once again, I was wrong, and everyone who wrote to correct me was right.

My bad. It won't happen again, until it does.

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Roth IRA conversion tax reporting. I am so confused! [View all] Susan Calvin Nov 29 OP

"The question is not whether that makes financial sense." mahatmakanejeeves Nov 29 #1

Thanks. Susan Calvin Nov 29 #2

Capital gains is a non-issue with IRAs. One is taxed on the value of the IRA at the time of withdrawal or conversion nmmi Nov 29 #15

Thank you. Susan Calvin Nov 29 #16

You're welcome. And I am so relieved you are considering doing small conversion amounts at a time nmmi Nov 29 #18

You are so nice to be relieved on my account. Thank you. Susan Calvin Nov 29 #19

I do a small rollover like this every year Shermann Nov 29 #3

Thanks. Susan Calvin Nov 29 #4

Form 1040-ES Estimated Tax for Individuals mahatmakanejeeves Nov 29 #5

Oh thank you! Susan Calvin Nov 29 #6

You should get your November monthly statement from whoever runs your IRA in a few days. mahatmakanejeeves Nov 29 #7

Oh great, one more thing to deal with. Susan Calvin Nov 29 #8

She will have no capital gains to separate out kansasobama Nov 29 #28

You don't have to wait to Jan 15. We pay the last estimated around the middle of December question everything Nov 29 #14

I think yours is the best advice I have received, Susan Calvin Nov 29 #12

I don't know your age. But I converted part of my IRA to a Roth at 64 one year before doc03 Nov 29 #9

I hadn't thought about that. Susan Calvin Nov 29 #10

Oh ouch. Susan Calvin Nov 29 #11

Are both the traditional and Roth with the same custodian? No forms are needed question everything Nov 29 #13

They are. It was only the estimated taxes I was concerned about. Susan Calvin Nov 29 #17

Also, depending on the amount you may be subjected to Alternative Minimum tax. question everything Nov 29 #20

Oh it's nowhere near enough for that. Susan Calvin Nov 29 #21

You might consider NOT doing any Roth conversions -- nmmi Nov 29 #22

Thank you for all the detailed advice. Susan Calvin Nov 29 #23

Interesting - 20 years is my base case default assumption on longevity in my spreadsheet nmmi Nov 29 #24

Oh I'm sure it's not too intuitive. Susan Calvin Nov 29 #25

If you can, spread it out until 2032 kansasobama Nov 29 #26

I'm not worried. I don't think I ever said or implied that I was. Susan Calvin Nov 29 #31

Penalty is minimal even if you do not pay estimated taxes on time kansasobama Nov 30 #37

Another sugestion when you convert from a IRA to the Roth if you have enough doc03 Nov 29 #27

Good advice although kansasobama Nov 29 #29

Absolutely. One advice that I keep reading consistently, is to never pay taxes from an IRA account, always pay the nmmi Nov 29 #30

I'm glad I asked the question, as long as y'all didn't mind replying. Susan Calvin Nov 29 #33

And then there is the NOT-simple matter about how much estimated tax to pay nmmi Nov 30 #34

I don't think that's going to be a problem in my particular case, but Susan Calvin Nov 30 #35

I use TurboTax to do my taxes and file online. Then when I get it right I print my tax return to have a permanent nmmi Nov 30 #36

Yes, that was my plan. Susan Calvin Nov 29 #32