We already consider Roth conversions for clients who are having an unusually low-income year, clients who are taking a sabbatical, going back to school, got laid off and can’t find a job, etc.
Because of this TCJA thing, even if this is a totally “normal” income year, you should still look at doing Roth conversions. These might end up being anomalously low tax rates anyways, simply because of federal tax policy.
Keep in mind that doing a Roth conversion means you are volunteering to pay taxes before you have to. You could just wait for another several decades to pay taxes on this money. But you’re making a bet that by paying taxes now, you’ll pay less (over your lifetime) than if you pay taxes later. (So much delayed gratification energy going on here, it hurts.)
It’s always possible you could convert the pre-tax money, and the tax rates don’t go up. Lord knows there have been bountiful predictions for decades now that tax rates will (“have to!”) go up…predictions that have yet to come true.
Consider doing this: Ask your CPA to model for you how much you can convert from pre-tax to Roth (in your IRA or 401(k)) and still stay within the same tax bracket, or even one tax bracket up, along with the tax bill you’d incur in both cases. If you want to convert, remember you have to do so by year’s end. You can even convert some this year and some again next year.
Remember, you want to have cash or taxable investments to pay the extra taxes. You do not want to withhold any money from the IRA in order to pay the taxes.
