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Another Strategy under the Tax Reform Act

With the changes to tax brackets, I'll be going from a marginal rate of 25% to 24%, with the ceiling of the 24% much higher than the former 25% bracket. Married filing jointly. Therefore before the sunset in 2025, it seems to me I should take the opportunity to convert over these 8 years an amount of my employee 403(b) retirement from pre-tax to Roth 403(b) while staying within the new 24% bracket. Then when the brackets revert back, I'll be in a higher bracket and will reap a positive benefit of the strategy.

Thoughts?

Reply to
Dimitrios Paskoudniakis
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You're pretty much on the right track, assuming you have the money to do it. Mathematically, if your tax bracket were to never change, a Roth conversion is the same as taking the money you pay in taxes on the conversion and contributing it to a Roth.

The question is what your tax bracket will be when you expect to withdraw the funds, or alternatively if you expect to not withdraw them during your lifetime. Figuring your expected tax bracket in retirement is a mind-numbingly complex undertaking.

You also didn't mention your state tax situation.

The short answer to your question thought is "Yes, good plan." Unless you expect to be in a lower tax bracket in retirement (are you planning to move from a high-tax state to a low-tax one?), there's likely to be no downside to your plan.

Reply to
Roger Fitzsimmons

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