Quick Q - is there any real benefit to converting
Post# of 148172
(Total Views: 481)
Posted On: 11/10/2020 11:37:29 AM
Re: LateToLearn #64856
Quick Q - is there any real benefit to converting the shares to Roth instead of using the $$ you need to pay in taxes for that conversion to simply buy more shares?
A) 100k shares @ $2 = $200,000 * 30% tax rate = $60,000 tax bill next April due to the conversion
$60,000 / $2 stock = 30,000 addt'l shares to buy
In ten years - $100 stock:
A) 100k shares * $100 = $10mm, no taxes due (Roth)
130k shares * $100 = $13mm * .77 tax rate = $10mm
The variable here is your current tax rate vs. future tax rate. The ones I used are for illustrative purposes....the bigger the differential b/w your tax rate today vs. when you retire, the more likely your benefit to keep in traditional IRA...assuming you buy shares with the $$ you would have allocated to the Roth conversion tax bill.
A) 100k shares @ $2 = $200,000 * 30% tax rate = $60,000 tax bill next April due to the conversion
$60,000 / $2 stock = 30,000 addt'l shares to buy In ten years - $100 stock:
A) 100k shares * $100 = $10mm, no taxes due (Roth)
130k shares * $100 = $13mm * .77 tax rate = $10mm The variable here is your current tax rate vs. future tax rate. The ones I used are for illustrative purposes....the bigger the differential b/w your tax rate today vs. when you retire, the more likely your benefit to keep in traditional IRA...assuming you buy shares with the $$ you would have allocated to the Roth conversion tax bill.
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