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I read here on HD and regularly elsewhere about Roth conversions. I never did one mainly because they weren’t available until after I retired at 67.
My questions are:
is there an age when doing the FIRST conversion for the FIRST Roth account is no longer prudent —- and if a conversion is made is it typical to pay tax taxes from the account being converted or other sources?
As nicely covered by many posters, the most likely ages to do Roth conversions are whenever current tax rates are lower than likely RMD tax rates (youthful low-income years, between retirement and RMD years, or if you feel tax rates will increase such as TCJA sunsetting) or otherwise for intergenerational estate wealth-transfer purposes.
Here is another decent third party summary:
https://www.financialarchitectsllc.com/Ruminations%20Files/Ruminations%20on%20Roth%20vs.%20Traditional%20IRAs.pdf
Of course, Medicare IRMAA impacts should be considered between age 63 and RMD start which has been frequently discussed on Humble Dollar including here:
https://humbledollar.com/2023/04/that-28000000-tax/
Anyone with “spare” taxes-paid cash might use those monies first to pay the taxes, but many folks will have to resort to using part of the converted assets to pay the taxes. This requires fine tuning based on each family’s asset sources and cash flow needs over years, so generalizations are tough to make.
Excellent comment John. I particularly like the 3rd party summary link above. The only thing I’d add is for someone planning on a large tax-deductible expense (such as a buy in to a ccrc) it might make sense to leave some money in a traditional IRA since the tax deductibility of the expense might significantly reduce the tax bill upon IRA withdrawal.
Richard, I would think that a retiree contemplating a Roth conversion would want to avoid converting too much such that the extra income pushes you past the IRMMA threshold.
If your modified adjusted gross income is close to an IRMMA threshold, the limited amount you could convert might not make it worthwhile.
There are a number of financial issues like Roth Conversions for which there are no easy answers. The range of possible personal financial situations are so numerous that there are no short, easy formulaic solutions. The best kind of professional to consult is a Certified Financial Planner, CFP. But, even as I say this, there are caveats. Many planners don’t want to just provide consulting services; they want to actually manage your investments and charge you on a % basis for so doing. So, the trick is to find a planner that charges by the hour.
AND, when/if you find one, the first question to ask, is if, in consideration of the amount of assets you own, you would benefit from such a consultation.
Hourly rates can be in the hundreds of dollars, so the larger your financial assets the more likely the benefit.
There are other questions beyond that of doing Roth Conversions for which an hourly planner might be helpful:
Whether or not to buy Long Term Care insurance.
Taking the lump sum or the annuity from a pension scheme.
When to take Social Security.
What is the best asset allocation for your risk tolerance.
How much do I need to have to retire.
You can try searching on the Internet for hourly financial planner.