True you converted more of your tIRA but only because the tIRA was smaller.If I decide that a Roth conversion is a good choice and that I can afford a $10k conversion this year...I can convert more shares to Roth if the market takes a dive than if the market goes up. For the same amount of tax, I will have moved more of my tIRA into Roth than if the market had not taken a dive.I am not seeing the significance of more shares getting converted. If a stock does a split, does that make Roth conversion more appealing?I don't think that is what they said.Both FiveK and Lee_WSP questioned the value of doing Roth conversions in a low market.
What they said is that a low market is not what is important. A low market does not create a "good" Roth conversion. Tax rates determine if a Roth conversion is a good idea or not. However, a low market will definitely make a good Roth conversion into a better Roth conversion.![:D]( "Very Happy")
There are a few people who believe this, but it is nowhere near "well established". What (primarily) makes a Roth conversion a good idea or a bad idea is the tax rate now vs later. In my opinion, that is what is "well established".I thought that concept was well established on Bogleheads now - I see there are still old guards still arguing the point.I don't think anybody disagrees with this statement. Of course, converting in a low market gets more shares converted. That's a good thing.It is pretty well established in the financial literature that if you are able to time a Roth conversion in the market when it is extremely low you are better off financially. For the same tax dollars you convert a larger % of your IRA or 401k tax burden.It's good that you got lucky, but if you converted at 35% and could convert later on at 12% or 22%, you cheated yourself.I was able to time the market perfectly in March 2020 and did a very large conversion to Roth on the lowest market day of the year. I simply took advantage of the market meltdown.
Can't comment on stock splits as I know nothing about that.
You are also ignoring the tax impacts. Value is 50 and you convert 25 but have to pay 5 in tax. So you only have 20 to put in Roth. So you have 45 of value.
Now your 50 declines to 25. Now you can convert all 25 but still have to pay 5 in tax. When the stock doubles back to where it was you only have 2*20 or just 40.
45 is better than 40.
Now FUTURE taxation might make up for this but growing from a bigger base compounds over time is better. Because the tIRA still contains funds, there is future liability for taxes. So might pay more taxes but paying more taxes because you have more isn’t a bad thing.
Statistics: Posted by LotsaGray — Mon Dec 18, 2023 11:52 pm — Replies 49 — Views 2016