Oblivious Investor http://www.obliviousinvestor.com Low-Maintenance Investing with Index Funds and ETFs Fri, 24 Apr 2015 12:00:02 +0000 en-US hourly 1 http://wordpress.org/?v=3.9.5 Investing Blog Roundup: ETFs vs. Index Funds — Why Not Both? http://www.obliviousinvestor.com/investing-blog-roundup-etfs-vs-index-funds-why-not-both/ http://www.obliviousinvestor.com/investing-blog-roundup-etfs-vs-index-funds-why-not-both/#comments Fri, 24 Apr 2015 12:00:02 +0000 http://www.obliviousinvestor.com/?p=7425 I’m frequently asked what I think about using ETFs as opposed to index funds. As I’ve written before, I don’t think it makes a big difference for most investors. And, as Rick Ferri reminds us this week, there’s no reason you can’t use  both.

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Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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HSAs and Medicare: a Potential Social Security Pitfall http://www.obliviousinvestor.com/hsas-and-medicare-a-potential-social-security-pitfall/ http://www.obliviousinvestor.com/hsas-and-medicare-a-potential-social-security-pitfall/#comments Mon, 20 Apr 2015 12:00:13 +0000 http://www.obliviousinvestor.com/?p=7423 A reader writes in, saying:

“I thought that I completely understood [Social Security strategies] but I sure didn’t understand the Medicare Part A/HSA complication.  Please make sure that your readers are aware of this significant complication, which doesn’t exist if you don’t have an HSA.”

The complication the reader is referring to is that, beginning with the first month you are enrolled in Medicare, you cannot contribute to a health savings account (HSA). The potential trouble arises as a result of the fact that it’s possible to become enrolled in Medicare without having intended to enroll. In fact, in some cases, you may even be unintentionally retroactively enrolled in Medicare, thereby making you ineligible for HSA contributions in a month in which you already made such contributions.

Automatic Enrollment in Medicare

The following comes from the Code of Federal Regulations:

Individuals who need not file an application for hospital insurance. An individual who meets any of the following conditions need not file an application for hospital insurance:

  1. Is under age 65 and has been entitled, for more than 24 months, to monthly social security or railroad retirement benefits based on disability.
  2. At the time of attainment of age 65, is entitled to monthly social security or railroad retirement benefits.
  3. Establishes entitlement to monthly social security or railroad retirement benefits at any time after attaining age 65.

In other words, you will automatically be enrolled in Medicare Part A* when you reach age 65 if at that time you are already receiving Social Security retirement benefits (or spousal or widow/widower benefits) or have been receiving Social Security disability benefits for more than 24 months. Alternatively, if you claim Social Security benefits (including as a part of a “file and suspend” strategy) at any point after age 65, you’ll automatically be enrolled in Medicare Part A at that time.

In addition, the same CFR section states that, “an application under § 406.10 that is validly filed within 6 months after the first month of eligibility is retroactive to that first month. If filed more than 6 months after that first month, it is retroactive to the 6th month before the month of filing.” In other words, if you become enrolled in Medicare Part A after reaching age 65, they’re going to backdate your enrollment by 6 months (but no earlier than age 65).

How About an Example?

Example: Jane files for her Social Security retirement benefit at age 66. As a result of that application, she is automatically enrolled in Medicare Part A. In fact, she will automatically be retroactively enrolled in Medicare Part A going back to age 65½ (i.e., 6 months prior to her application). If Jane had made contributions to an HSA in any of those 6 months for which she is now retroactively enrolled in Medicare, she has a problem.

What To Do About This?

The way to avoid this situation is as follows:

  • If you file for Social Security benefits at any point prior to age 65, you will want to stop making HSA contributions at age 65.
  • If you aren’t claiming any Social Security benefits until after age 65, you will want to stop making HSA contributions 6 months prior to the date at which you file for Social Security benefits.

If you have already made HSA contributions in a month in which you were ineligible due to automatic Medicare enrollment, your options are to:

*When you are enrolled in Medicare Part A, you are automatically enrolled in Part B as well, but you are given the opportunity to opt out of it, should you want to do so.

Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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Investing Blog Roundup: Why Did My Share Price Fall? http://www.obliviousinvestor.com/investing-blog-roundup-why-did-my-share-price-fall/ http://www.obliviousinvestor.com/investing-blog-roundup-why-did-my-share-price-fall/#comments Fri, 17 Apr 2015 12:00:58 +0000 http://www.obliviousinvestor.com/?p=7422 One of the most common questions I see (both via email and on the Bogleheads forum) is why the share price of a given fund went down unexpectedly — perhaps even on a day when the market is up. This week, Vanguard provides a clear answer to that question:

Investing Articles

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Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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9 Good Reasons for Claiming Social Security Early http://www.obliviousinvestor.com/9-good-reasons-for-claiming-social-security-early/ http://www.obliviousinvestor.com/9-good-reasons-for-claiming-social-security-early/#comments Mon, 13 Apr 2015 12:00:48 +0000 http://www.obliviousinvestor.com/?p=7408 There’s been quite a bit of talk over the last few years about the fact that most people should wait to claim Social Security, if they can afford to do so. And that’s true, for two reasons:

  1. Waiting to claim Social Security reduces risk, because it is a decision that works out best in the most financially scary scenarios (in which you live a very long time and therefore have to fund a very long retirement).
  2. Waiting to claim Social Security maximizes spendable dollars, in most cases. (That is, with inflation-adjusted interest rates as low as they are right now, for more than half of people, delaying Social Security will result in having a greater number of inflation-adjusted dollars to spend over the course of their lifetimes.)

But it’s important to understand that, while it makes sense in the majority (i.e., greater than 50%) of cases to delay, there are still many situations in which a person would be well served by claiming Social Security earlier rather than later.

The first and most obvious reason to claim Social Security early is simply that you need the income immediately.

But, beyond that, there are still several cases in which, if you do not need the risk reduction that comes from delaying Social Security, your spendable dollars are likely to be maximized by claiming benefits earlier rather than later.

What follows are eight examples of such cases. (To be clear, this is not meant to be an exhaustive list. These are simply some of the more common such situations.)

1. You are single (and have never been married) and you have a significantly shorter than average life expectancy due to a medical condition.

2. You are the spouse with the lower primary insurance amount in a married couple and you or your spouse have a shorter than average life expectancy.

3. You are the low-PIA spouse in a married couple, and you’re many years younger than your spouse (meaning that, when you are age 62, your first-to-die life expectancy is significantly shorter than the first-to-die life expectancy of a couple in which both spouses are age 62).

4. You are the low-PIA spouse in a married couple, you are younger than your spouse, and you are filing early in order to allow your spouse (i.e., the higher-PIA spouse) to claim spousal benefits while he/she allows his/her own retirement benefit to continue growing until 70.

5. You are a widow/widower, and you’re claiming retirement benefits as early as possible while allowing your widow/widower benefit to continue growing until your full retirement age. Or, you’re claiming widow/widower benefits as early as possible while allowing your retirement benefit to continue growing until age 70.

6. You have one or more children who would qualify for child’s benefits once you file for your retirement benefit (thereby making the cost of waiting significantly greater than it is for most people).

7. Inflation-adjusted interest rates are high (unlike they are right now), making the option of taking the money and investing it a better deal. (Interest rates would have to be super high, however, for this to be a good deal for the high-PIA spouse in a married couple.)

8. You will qualify for a sizable government pension from work that was not covered by Social Security, and you’re claiming Social Security spousal benefits early while delaying your pension (so that the pension grows and so that you can put off applicability of the government pension offset).

Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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Investing Blog Roundup: Do You Have a Portfolio or Investment Collection? http://www.obliviousinvestor.com/investing-blog-roundup-do-you-have-a-portfolio-or-investment-collection/ http://www.obliviousinvestor.com/investing-blog-roundup-do-you-have-a-portfolio-or-investment-collection/#comments Fri, 10 Apr 2015 12:00:00 +0000 http://www.obliviousinvestor.com/?p=7420 This week, Jim Dahle addresses an exceedingly common investment mistake: having a portfolio that’s really just a collection of investments that you’ve accumulated over the years — as opposed to an actual portfolio with a coherent strategy.

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Thanks for reading!

Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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When Is the Best Time of Year for a Roth Conversion? http://www.obliviousinvestor.com/when-is-the-best-time-of-year-for-a-roth-conversion/ http://www.obliviousinvestor.com/when-is-the-best-time-of-year-for-a-roth-conversion/#comments Mon, 06 Apr 2015 12:00:43 +0000 http://www.obliviousinvestor.com/?p=7415 A reader writes in, asking:

“Is there a time of a year when it’s best to do a Roth conversion? Perhaps close to the year end such that a person can estimate their income/AGI, or whenever the market is down in order to make the cost of conversion lower?”

If you have a high tolerance for hassle, doing a conversion ASAP at the beginning of the year is often the best strategy, because you can just change your mind later (up until the due date of your tax return) via “recharacterization” if you don’t like the results. For example, you could recharacterize if:

  • It turns out that your income for the year is higher than you expected (meaning that your rate of tax on the conversion is higher than you’d anticipated), or
  • The assets that you converted have decreased in value, meaning that you could recharacterize, then do the conversion again later at a lower cost.*

Financial planner Allan Roth has even written about an advanced version of this strategy, in which you do multiple early-in-the-year conversions, with the plan to recharacterize any that you don’t like.

If, however, you are the type who would not bother with a recharacterization, then doing a conversion when the market is down would make sense — at least in theory — because that would be the time that the conversion is least expensive (both because the account balance is smaller and because that is when it would usually be most advantageous to liquidate taxable holdings in order to help pay the tax on the conversion).

There is, however, a downside to the strategy of waiting for a market downturn. In short, it leaves you playing a market-timing-style guessing game. For example, imagine that you plan to do a conversion this year, and you decide to wait until a market downturn. What if the market goes down, say, 3% in January? Do you convert then, or do you wait in the hope that it goes down further later in the year? There’s no way to know which answer is right. Or, what if the market has a great year, never going below the point at which it started? In such a case you’d be left having to eventually convert in December at a high point, thereby having to pay a higher cost than if you’d just gone ahead and done it at the beginning of the year.

If you don’t want to bother with recharacterizations or market timing guessing games, then:

  • Doing conversions late in the year makes sense if you have a high degree of uncertainty about your income/deductions (because, near the end of the year, you would no longer have as much uncertainty, thereby making it easier to determine what your tax rate would be on the conversion and whether or not the conversion would be advantageous), and
  • Doing conversions early in the year makes sense if you know it will be a good year for a conversion (with the reason being that the market typically goes up over time, so an early conversion is typically going to be less costly than a conversion at a later point).

*To do a second conversion of a given amount (that is, after undoing the first via recharacterization), you must wait until the later of a) 30 days after the recharacterization or b) the year following the year of the conversion.

Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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Investing Blog Roundup: Ben Bernanke the Blogger http://www.obliviousinvestor.com/investing-blog-roundup-ben-bernanke-the-blogger/ http://www.obliviousinvestor.com/investing-blog-roundup-ben-bernanke-the-blogger/#comments Fri, 03 Apr 2015 12:00:47 +0000 http://www.obliviousinvestor.com/?p=7418 Whether you are in favor of or opposed to the actions he took during his term as Chairman of the Federal Reserve, there’s no denying that Ben Bernanke is one of the most prominent figures in the financial world. I learned this week that Bernanke recently started blogging on the Brookings Institution website. His first topic: why interest rates are so low. (As a heads-up: The reading is somewhat more technical than you’d normally find here on the blog.)

Investing Articles

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Thanks for reading!

Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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Tax Planning for Widowhood (or Widowerhood) http://www.obliviousinvestor.com/tax-planning-for-widowhood-or-widowerhood/ http://www.obliviousinvestor.com/tax-planning-for-widowhood-or-widowerhood/#comments Mon, 30 Mar 2015 12:00:27 +0000 http://www.obliviousinvestor.com/?p=7147 Your marginal tax rate (and, in many cases, how you expect your marginal tax rate to change over time) is a critical factor in tax planning decisions.

One thing that married couples often fail to consider in their planning is that, in the majority of cases, after one spouse dies, the widow/widower’s marginal tax rate will be greater than the marginal tax rate that the couple faced in the years immediately prior to the first spouse’s death.

Unfortunately, there is of course no way to know when widowhood will start or how long it will last. I’ve found it challenging to even determine how long widowhood lasts on average. I’ve seen figures from 8 years to 15 years quoted by reputable sources. Regardless, even 8 years is a considerable length of time and merits inclusion in tax planning.

Why Does Marginal Tax Rate Increase When One Spouse Dies?

After one spouse dies, the surviving spouse (starting in the following year, when they would have to begin filing as single) is left with smaller tax brackets. The 10% and 15% tax brackets are exactly half the size for single people that they are for married couples filing jointly. And the standard deduction and personal exemption of the surviving spouse are half of the amounts that the couple used to receive.

As far as income, there is typically a reduction when one spouse dies, but that reduction is typically insufficient to counteract the smaller exemption, standard deduction, and tax brackets. Social Security, for instance, does fall when one spouse dies, but the reduction is usually less than 50% (because if the spouse with the higher retirement benefit dies, the surviving spouse can claim a widow/widower benefit that’s equal to the deceased spouse’s retirement benefit). And investment-related income doesn’t typically decline at all when one spouse dies.

How Does This Affect Tax Planning?

This foreseeable increase in marginal tax rate after the death of one spouse is important because it affects decisions in which you have to compare your current marginal tax rate to the marginal tax rate you expect to have in the future. Specifically:

  • It is a minor point in favor of making Roth contributions (as opposed to tax-deferred contributions) during working years,
  • It is a significant point in favor of prioritizing retirement spending from tax-deferred accounts (as opposed to Roth accounts) while both spouses are still alive, and
  • It is a significant point in favor of doing Roth conversions while both spouses are still alive.

Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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Investing Blog Roundup: Employer Stock in Your 401(k) http://www.obliviousinvestor.com/investing-blog-roundup-employer-stock-in-your-401k/ http://www.obliviousinvestor.com/investing-blog-roundup-employer-stock-in-your-401k/#comments Fri, 27 Mar 2015 12:00:27 +0000 http://www.obliviousinvestor.com/?p=7416 No matter how confident you are in your employer’s prospects, it’s generally a bad idea to hold a significant portion of your portfolio in your employer’s stock, if you have a choice in the matter. As Ron Lieber reminds us this week, investing heavily in the stock of your employer puts you in a position where not only your income but also your savings are dependent upon the results of one company.

Investing Articles

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Thanks for reading!

Interested in economics? Pick up a copy of my latest book:

Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

Disclaimer: Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Mike Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Mike Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Mike Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. I am not a financial or investment advisor, and the information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

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Is a Roth Conversion a Good Idea? http://www.obliviousinvestor.com/is-a-roth-conversion-a-good-idea/ http://www.obliviousinvestor.com/is-a-roth-conversion-a-good-idea/#comments Mon, 23 Mar 2015 12:00:28 +0000 http://www.obliviousinvestor.com/?p=7414 A reader writes in, asking:

“Regarding Roth conversions, is it worth it to convert, putting yourself in pretty high tax brackets if you have a lot to convert? Second is it worthwhile to do some converting when the result would likely still leave you with heavy RMD’s and 85% of SS taxed, nullifying some of the better reasons to convert?”

In the simplest situation — in which a person has only tax-deferred and Roth accounts — it usually only makes sense to do a Roth conversion if your marginal tax rate on the conversion is lower than you expect your marginal tax rate to be at every point in the future. (Otherwise, you could wait until the point at which you do have the lower tax rate and do the conversion then.)

Even with this simple situation, however, there are three additional points to keep in mind.

First, at least in theory, this analysis should be done dollar-by-dollar, because converting isn’t an all-or-nothing question. For example, if you have $500,000 in a traditional IRA, it may make sense to convert some of it. But after you’ve already converted a certain amount this year, you reach a point where your marginal tax rate on additional conversions is higher (e.g., because you’re in a higher tax bracket or because you reach a point where additional income would reduce/eliminate your eligibility for a certain tax break), so the math changes for additional conversions.

Second, you must include any applicable penalty when figuring the marginal tax rate on the conversion. For example, if you have $100,000 in a traditional IRA and you move $85,000 to a Roth IRA and $15,000 to your checking account in order to use it to pay the tax on the conversion, that $15,000 would count as a distribution and could be subject to the 10% penalty if you’re under age 59.5.

Third, as we’ve discussed here on several occasions, your marginal tax rate is not necessarily the same as your tax bracket. (It’s super common, for instance, for retirees to have a higher marginal tax rate than the tax bracket they’re in, due to the way in which Social Security is taxed.)

What if You Have Taxable Accounts As Well?

With taxable accounts in the mix as well, the analysis becomes much more complicated. In short, having money in taxable accounts typically makes Roth conversions more appealing, because you can use that taxable account money to pay the tax on the conversion, rather than having to siphon off some of the IRA assets to pay the tax.

As a result, if you have non-retirement-account assets with which you could pay the tax, Roth conversions typically make sense even if you expect to have only the same marginal tax rate in the future as you have right now. In fact, they can even make sense in some cases in which you currently have a higher marginal tax rate than you expect to have in the future — because the advantage that comes from tax-sheltering more of your assets may outweigh the disadvantage of paying a (relatively) high tax rate on the conversion.

In cases in which your tax rate on the conversion would be higher than the marginal tax rate you expect to face in the future, some of the factors to consider when deciding whether to convert or not would include:

  • How much higher is your current marginal tax rate than the marginal tax rate you expect to face in the future? (The greater the difference, the more appealing it becomes to wait rather than do a conversion now.)
  • How long do you expect the assets be in the Roth account? That is, how long before you expect to spend the money? (The longer, the greater the savings from a conversion due to not having to pay tax on further growth.)
  • What rate of return would you expect for the assets in question? (The higher, the greater the savings from a conversion.)
  • Do you have sufficient cash on hand in taxable accounts to pay the tax (or, alternatively, assets in taxable accounts that have cost basis equal to or greater than their current market value)? If you would have to liquidate taxable holdings — and pay capital gains taxes in doing so — in order to raise cash to pay the tax on the conversion, that’s a point against the conversion.
  • How likely do you think it is that you’ll be leaving these assets to heirs? (In many cases, it’s actually tax-efficient to leave taxable assets to heirs, because the heirs would get a step-up in cost basis.)

As you can see, this isn’t a question to which you can calculate a definitive answer, because many of the factors are unknowable. As a result, you may find that it makes sense to take a middle-of-the-road sort of approach, in which you do relatively modest conversions each year (perhaps converting until you reach the top of your current tax bracket) and sometimes converting more in years in which your income (and therefore marginal tax rate) is lower or the market is down (thereby reducing the cost of a conversion).

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Microeconomics Made Simple: Basic Microeconomic Principles Explained in 100 Pages or Less

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