Good time to convert trad. IRA to Roth?

Hi all,

I've got a rollover IRA at Vanguard whose funds came from rolling over the 401k's from two different previous employers. The total balance in the rollover IRA right now is about $4,500, which is about 32% less than the amount of money that was rolled over into it (due to the facts that (a) I left the money sitting in a money market account for most of the time since I rolled it over, and (b) the market recently crashed).

I try to keep most of my retirement savings in Roth IRAs, since I expect (hope? :-) that my tax bracket will be higher during retirement than it is now. It seems to me that given the recent drop in the stock market and the corresponding drop in the value of the rollover IRA, now would be a good time to convert the money in this IRA into my Roth IRA and take the tax hit.

Any thoughts?

Thanks,

Jonathan Kamens

Reply to
Jonathan Kamens
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What marginal bracket are you in now? 10%? 15%? And what bracket do you expect down the road? What are the prospects of brackets changing in tax year 2010? in 2011? etc?

Or, as Dirty Harry might ask: Do you feel lucky?

ChEAr$, Harlan

P.s. If you have any mojo with that Mr Devnull fellow who keeps emailing me, DO something. I'm tired of it. And if I get another one from him, this is my last post.

Reply to
Harlan Lunsford

I'm in the 25% bracket now. I expect to be in the same bracket or higher during retirement, because I currently have five dependent children and a mortgage and try to make substantial charitable contributions every year. God willing, the charitable contributions will continue into retirement, but the kids will grow up and move away and the house will be paid off.

It seems foolhardy to throw up my hands and do nothing because I can't tell the future. I think it's reasonable to make decisions under the operating assumption that things will look much like they do now, because what better choice is there? And, of course, these decisions are not completely irrevocable, so adjustments can be made later as circumstances (and tax law) warrant.

I've added snipped-for-privacy@bellsouth.net to the list of addresses which receive acknowledgments.

It doesn't do any good to send snipped-for-privacy@asktax.org a message if you don't send it from the same return address that you use to post. Otherwise, how is it supposed to know which address to add to the no-ack list? I've updated the text in the ack message to make this clearer.

Reply to
Jonathan Kamens

Then what makes sense to me is: Convert no more than what would kick you up past the 25% bracket. Note that in 2010 (14 months from now, if you do it in January) that the special 2-year spread for conversions is available. Converting in 2010 and paying later makes sense if things go up, and hopefully, we'll have a better idea of what the economy is doing by then.

Reply to
D. Stussy

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