Another reason to consider Roths is that the SECURE Act did away with stretch IRAs, which forces those who inherited individual retirement accounts to remove their funds within 10 years rather than stretching out the distributions over time, a strategy that allowed lower taxes and more favorable estate planning. That puts even more pressure on retirees to get money out of taxable funds at lower brackets.

“The important thing to note,” said Leon LaBrecque, an advisor with Sequoia Financial Group in Troy, Mich., “is that the optimal Roth conversion amount is usually the amount to get to the edge of the next tax bracket. We use this 'bracket topping' strategy frequently and the results are useful.”

The best candidates for conversions, said Bohnsack, are retirees with brokerage assets at maybe $50,000, $60,000 or $70,000, that don’t have to take required minimum distributions this year. “We know for sure they are going to be in a [higher] tax bracket next year,” he said, maybe back at 22% to 24%. So to put them in a 12% tax bracket this year “seems like a fat pitch to swing at.”

He said his firm estimates that it did 10 to 20 conversions last year. After reviewing 86 clients that waived RMDs, he said, “my guess is that we could do upwards of 40 to 50 conversions this year.”

Christopher Cortese, an advisor with Wescott Financial Advisory Group in Philadelphia, said this has been a good talk to have with clients in their early 70s.

“We have started to reverse or completed reversing RMDs previously taken this year as we anticipate some clients will move down two or three tax brackets without their distribution,” Cortese says.

Not So Fast
But don’t get carried away. There are also good reasons not to convert, said Laurie Siebert, a senior vice president and CPA at Valley National Financial Advisors in Bethlehem, Pa. Namely, you forget the benefits you’re going to lose.

Roth conversions, after all, are considered ordinary income. That means you could pump up the tax rate you might be paying on capital gains and qualified dividends and miss out on a zero cap gains tax. You might also get ensnared in Social Security taxes if you pump up income.

There are other reasons to keep your adjusted gross income low. “A lower AGI may reduce Social Security and [income-related monthly adjustment amounts] on Medicare in the applicable year,” Siebert said.

And finally, a lower adjusted gross income for 2020 means you might qualify for a stimulus payment that you otherwise couldn’t have gotten because your income was too high, Siebert said.

“Bottom line, don’t disregard other tax benefits that could be available outside the conversion,” she added.

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