68 • RUBY, WILDING & SWANSBURG that additional income—something I want to avoid. So instea d, I woul d sprea d out t he withdrawal s over several years. Conceptually, by taking smaller amounts over time to sta y wit hin my current tax bracke t, I'd pay around $175,000 in taxes to convert my IR A to a Roth IRA. When I compared keeping these funds in my IR A to converting these funds to a Roth IRA, I saw that only one of these options carried the possibility of never havi ng to pay taxes on my funds again, for both myself and my heirs. When I considered my potential taxes in retirement, it was like drivi ng do wn a highway with two exits . On one exit, I pay a $175,000 toll right now and then can get to my destinat ion without pa ying a ny additional toll s. O n t he ot her exit , I st op at tollboot h aft er tollboot h until I’ve pa id $490,000 to get to my destination. Mandatory vs. Optional While look ing at t he preced ing graphic, something jumped out at me. Assuming my taxes stay the same or go up, a Roth conversion represents the least amount of tax I will pay on my IR A account: After my conversion, no more taxes are due , assuming I abide by the distribution rules of the Roth IRA . I think of this as the mandatory amount of taxes I owe the IRS in this a ccount . But, my projected taxes are much higher than that mandatory amount. And, the difference is optional taxes I’ m choosing t o pay, b ased on how I save going forw ard. In this analysis, I’ m projected to pay $317,000 in optional taxes (above and beyond the mandatory amount) if I maintain my IRA.
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