[quote=waiting for bottom]Not sort of. Yes. Convert the 95K too.[/quote]
My point is that you would pay significant taxes on conversions in many cases.
If you have existing IRAs, there is a big difference between being able to contribute to a Roth and being able to convert to a Roth !
Example:
If you make 151K and use the contribute and convert strategy, it will cost you about ~$2000 in taxes (in addition to the taxes you already paid on the 5K you earned) in my example. But if you made less than 150K, you can contribute directly to a Roth and not pay the conversion tax.
If one were to take the suggestion to convert the entire 100K in my example, it would cost about ~ 38 K. (28 % federal, 9.3% CA state tax brackets, unless it bumped you over 208K income, which makes it 33% federal, oh yeah and there is that 1% surtax in CA so that’s an extra $380).
It would also put many people in these brackets further into AMT territory and impact phase out of deductions. The marginal tax hit could be significantly more than 38K.
The contribute/convert to a Roth for people making over 150K is really not the same as removing the income test on Roth contributions, for those with existing IRAs.
