From 24/7 Wall St. · Danielle Liverance · · 1m 30s
Retired Couple's Roth Conversion Strategy
Retired couple converts $73,000 to Roth IRA while staying in 12% tax bracket.
In brief
Retired couple converts $73,000 to Roth IRA while staying in 12% tax bracket. Retired couple takes $34,553 RMD then converts $73,000 to Roth IRA to stay in 12% tax bracket, paying $10,993 in federal tax. Originally reported by 24/7 Wall St..
RMD Deadline for Retired Couple
Retired couple both 75 must take $34,553 RMD from $850,000 IRA by Dec 31.
Roth Conversion Limit in 12% Bracket
Largest Roth conversion keeping taxable income under 12% bracket is $73,000.
Tax Impact of Conversion
Conversion costs $10,993 federal tax, or 15.1% of $73,000 converted.
RMD Calculation Method
RMD calculated as IRA balance divided by 24.6, the Uniform Lifetime Table factor for age 75.
Social Security Taxability
Converted dollars increase taxable Social Security benefits until 85% are taxed.
Taxable Income Calculation
After conversion, taxable income is $99,833 with $11,484 federal tax due.
Next Tripwires for Conversion
Converting $83,000 would push into 22% tax bracket and reduce senior deduction by $880.
2027 Tax Brackets Impact
2027 brackets widen 12% bracket to $104,050 taxable income and increase standard deduction.
Next Year's RMD Reduction
Roth conversion reduces next year's RMD by $3,080, saving $370 to $464 in tax.
Conversion Strategy Tradeoffs
Conversion saves tax for surviving spouse but requires long-term financial planning.
Final Conversion Recommendation
Retired couple should take $34,553 RMD then convert $73,000 to stay in 12% tax bracket.
What to remember
Retired couple takes $34,553 RMD then converts $73,000 to Roth IRA to stay in 12% tax bracket, paying $10,993 in federal tax.
