Convert roll over IRA to Roth IRA

Taxes
#1

Good Morning,

I was wondering if it would be wise to convert my rollover Ira about 30k to a Roth IRA. I’m asking because I’m currently in the 22% federal tax rate and IL state tax is 6.25%. In 2-3 years my wife and my income will increase and we will be in a higher tax bracket(24%). Was not sure if it’s best to pay taxes now and covert it to a Roth IRA.

Another thing to factor in is that once our income increases. We will have to do a backdoor Roth and I heard if I had money in a rollover IRA. I will have to pay Pro Rata tax.

As always thanks for your time and answer

#2

Hey Tom!

Not your CPA, etc, but I think you’re thinking about this correctly. You generally want to do a conversion to roth in a low income/low tax year. You could just leave it forever and withdraw it in retirement, but if you’re expecting to do a backdoor Roth IRA in the upcoming years and this is a relatively low income tax year, then it may be a perfect time to do it. Note that $30K would be taxed as though it’s added to your income this year… you’ll have to pay the tax on it. It might be worth running by a CPA because that’s a decent chunk of change, but I think your thinking is on track! :slight_smile:

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