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Roughing In: IRA Conversion before 12/31

Discussion in 'General Discussion | Finance' started by Matt, Dec 30, 2016.

  1. Matt

    Matt Administrator Staff Member

    "Roughing In" is a term you find electricians and plumbers use. They come to the work site and build a 'rough' channel or pipeline while the walls are open, pull through the wires or pipes needed, and leave it looking like a bomb site. They then come back to finish the job, attach faucets or outlet plates, and tidy things up.

    The rough in is important because it allows them to get things done before a wall is closed up or a cabinet is installed, so that the Pattern™ is in the correct order.

    Traditional to Roth conversions generate taxable income via 1099R in the year that they occur. Sometimes it's hard to know exactly your AGI for the year, and if you should convert (and how much). The good news is that if you haven't yet contributed to an IRA, and have some (but not sure how much) income for the year, you could 'Rough In' your 2016 MAGI by putting in a general conversion, within $11K+wiggle room for MFJ.

    Then, when W2's and 1099 forms are generated, and you learn the precise amount of your 2016 earnings, you can go back and tidy up via a Traditional IRA to dial down excess, if needed, and split the balance into a Roth.

    Note this is only good for people who think they are close to a certain MAGI threshold that offers value to them, but aren't sure of the exact amount of their income, and I'm only posting it so Vinh doesn't kill me off....
     

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