Question for the Money Doctors

Question submitted on Jun 18, 2022.

Question

Hello Money Doctor,
We are both 58 y/o. our gross income is $158,517 for 2021 Our tax bracket is 22%. Our monthly spending is approx $5000-6000 monthly. We have approx 1.4M IRA/403, $225, 000 Roths each, $145,000 Cash brokerage & wife has a $67,000 cash value pension. I'm retired since 2014 with a $5000 net pension for life and free health coverage for life.No debt house paid off. We will definitely be in the 12% lower tax bracket once my wife retires end of the year. My wife will retire this year or next. A lot of financial gurus pushing Roth conversion in our case we are not sure it makes sense in the 22% tax bracket or the 12%. I would love to hear your thoughts. Thank you

Answer

Congratulations for being so prepared for retirement.  You have many of your bases covered.

While your wife is still working, I highly recommend maxing out on her retirement account contributions.

Will your wife also be covered by your health insurance policy?  If not, you will need to consider her health insurance coverage costs.   Both of you are retired before age 65 when you can be covered by Medicare so there should be some pre-Medicare planning.

Roth conversion planning involves many considerations.   In your case, I would not suggest any Roth conversions while you are in the 22% tax bracket.

Roth conversion planning also depends upon your estate planning considerations and your present vs future tax brackets.   Accordingly, this should be reviewed again after your wife retires from her current employer.

Accordingly, I do not suggest any Roth conversions at the moment because it will only increase your current tax bill.

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