For the past few years I have been converting funds in a traditional (rollover) IRA to Roth funds. I'm 62 and my plan was to empty the IRA before I turn 65 and before we revert to higher income tax levels in 2026. The IRA contains mostly BND (Vanguard Total Bond ETF) and BSV (Vanguard Short-Term Bond ETF) which together comprise 75% of the account. The last conversion I did was in 2021; in 2022 I stupidly delayed my conversion until the end of December and then ran out of time. In 2021 I transferred BND and BSV, which were in the black at the time, directly to the Roth account (which contains only converted funds from this process).
I know that having bonds in a Roth doesn't make the best sense and I will re-jigger all of our accounts to reflect our 50/50 AA, with equities in the Roth, at some point in future. During the recent bond bloodbath I decided to stay the course with these two bond ETFs. But perhaps I should sell them now for a loss, harvest capital gains, and then convert? Versus sending them to the Roth account and continuing to hold them and let them recover in the Roth? I bought these two ETFs in 2018.
It's not a large amount of money; about $124,000 (cost basis $133,000).
This must be coming up for many Roth converters, given that many of us have bonds in tax deferred accounts.
I'm feeling muddled about all this, please help me clarify my thinking!
Of course I need to do this conversion very soon for 2023. One other factor is that DH and I have over-withheld income tax from his pay this year and doing the conversion would eat up the large tax refund we would otherwise get. So I don't need to think about where the income tax payment comes from.
I know that having bonds in a Roth doesn't make the best sense and I will re-jigger all of our accounts to reflect our 50/50 AA, with equities in the Roth, at some point in future. During the recent bond bloodbath I decided to stay the course with these two bond ETFs. But perhaps I should sell them now for a loss, harvest capital gains, and then convert? Versus sending them to the Roth account and continuing to hold them and let them recover in the Roth? I bought these two ETFs in 2018.
It's not a large amount of money; about $124,000 (cost basis $133,000).
This must be coming up for many Roth converters, given that many of us have bonds in tax deferred accounts.
I'm feeling muddled about all this, please help me clarify my thinking!
Of course I need to do this conversion very soon for 2023. One other factor is that DH and I have over-withheld income tax from his pay this year and doing the conversion would eat up the large tax refund we would otherwise get. So I don't need to think about where the income tax payment comes from.
Statistics: Posted by Sagefemme — Wed Dec 20, 2023 9:15 am — Replies 3 — Views 174