Roth IRA Conversion Strategy – Fill Out The Bracket

One strategy to consider as you think about making Roth IRA conversions is the idea of “fill out the bracket”.  With this strategy, you consider your income level and what bracket you’re in, and if it makes sense, convert enough of your IRA or QRP (such as a 401k) to effectively use up the remainder of the tax rate bracket that you’re in.

Of course, this mostly makes sense in the lowest brackets, but for some folks with potentially high incomes it may be appropriate at higher brackets.  Your feeling on this also depends on what you think will happen with tax rates as you get to the point where you’re ready to retire – and if you’re like me, you’ve got to believe that tax rates are on the rise.

The following table illustrates the highest income you could have within each tax bracket, using the rates for a Single taxpayer and a Married Taxpayer, using only the Standard Deduction for 2018. If you itemize, add the difference of your itemized deductions above the standard deduction of $12,000 for single and $24,000 for married.

If you’re at or over age 65, add $1,600 if you’re single, or $1,300 for each member of a married couple who is 65 or older. Add the same amount if you’re blind.

2018 Top Income Levels Per Bracket

Tax Bracket
























To use the above table, calculate your income – from wages, salaries, tips, dividends, interest, short-term capital gains, rental income, etc..  Figure out which bracket you fit into, based on the table.  Subtract your income amount from the amount for your applicable bracket:  the remainder is how much you could convert to a Roth IRA while remaining in that tax bracket.

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