06-17-2022, 06:44 AM
I just posted this on SA.
Here's my IRA conversion plan. Remember that my Roth and IRA are TR accounts as opposed to my Taxable Account which is for dividend income.
This morning I made my first conversion. All I did was convert $1,700 cash which was IRA dividend income accrued over the past month or so. I did this for a couple of reasons. Number 1 was to see the Fidelity interface/process* and number 2 is to gauge how long it takes for converted cash to become available.^
So here is my plan for converting stocks.
1) Evaluate candidates for in-kind conversions. I have already done this. This is how I'm selecting them:
a) I'm starting with stocks showing a 20% or greater loss since I bought them in late February/early March.
b) From this list I look at those I think are likely to lead the market when it recovers. If I plan to continue holding something, what are the future potential gains and how quickly might they come? Hypothetically I could look at companies I have gains in like DG or ANTM if I thought they'd spike quickly on a recovery but starting with losers is a good way for me to narrow things down.
c) For this reason, none of my spec stocks are candidates at this time. I bought those with (almost) no expectations. LCID is a good example. I'm down 40%. But I have no idea what it will do - the company hasn't proven itself and was bought with the idea that if it went to 0, as my buy was small, it wouldn't hurt me much. No point converting something that could go to 0. So I'm looking at companies that have solid (or better) long-term prospects. If I were doing this today AMZN and NVDA would definitely be converted.
2) Set price targets to do conversions along with amounts. These are:
a) S&P 3500. This will be the first "tranche" and a fairly large one. I'm looking at roughly $70k. This would get my estimated 2022 income to around $130k, leaving me with $40k to stay in the 24% tax bracket.
b) Additional conversions as the market drops further. Right now my next tranche would be at S&P 3200. This would be for $10-20k depending on if the market starts to show signs of setting a floor. Once I make that buy I'll assess further possible levels though if I do $20k I may just sit until c) to leave me some wiggle room for Taxable Account transactions the rest of the year.
c) If the markets have a fairly quick recovery, something I do not expect, while I'll assess things on an ongoing basis, my final conversion will likely come late in the year to get me close to the $170k
I'll be making sure I'm staring at my PC at 3:30 this afternoon. I will be very surprised if today's pre-market rise holds and think there could be a heckuva drop late in the day - twitchy downward market going into a 3-day weekend? I'm as bad a person in the world as there is to pay attention to re this stuff but that sure spells late-day selling to me.
I will post moves as I make them. As a caution - once I decide something I often develop FOMO. Would I convert if the S&P starts bouncing around near the 3550 level for a couple of days? I suspect I'd ask myself what those extra 50 points are worth and do it, similar to when I sometimes buy a stock trading pennies above my target price.
NEW QUESTION: Could an in-kind conversion trigger a wash sale? Here's the possible (not likely) scenario:
I am looking at buying BBY at $65 in my taxable account. This would take me overweight. I have some shares bought in the high 90's which I'd sell after 31 days.
If I decide to convert BBY shares from my IRA inside this 31-day period, would the IRS interpret this as a stock sale? Doubt it happens - BBY is down some and I expect a nice recovery but not on the scale of some others.
*Very simple. The interface lists each holding in the IRA and gives you the option to convert some or all of it. The next point of curiosity is what price it gives me for converted stocks. I THINK it will be the price at the time I make the transfer but I've seen sites saying the actual transfer may execute a day or two later using those prices. I'll know when I know.
^Cash was available immediately. I won't know on stocks until I convert one.
Here's my IRA conversion plan. Remember that my Roth and IRA are TR accounts as opposed to my Taxable Account which is for dividend income.
This morning I made my first conversion. All I did was convert $1,700 cash which was IRA dividend income accrued over the past month or so. I did this for a couple of reasons. Number 1 was to see the Fidelity interface/process* and number 2 is to gauge how long it takes for converted cash to become available.^
So here is my plan for converting stocks.
1) Evaluate candidates for in-kind conversions. I have already done this. This is how I'm selecting them:
a) I'm starting with stocks showing a 20% or greater loss since I bought them in late February/early March.
b) From this list I look at those I think are likely to lead the market when it recovers. If I plan to continue holding something, what are the future potential gains and how quickly might they come? Hypothetically I could look at companies I have gains in like DG or ANTM if I thought they'd spike quickly on a recovery but starting with losers is a good way for me to narrow things down.
c) For this reason, none of my spec stocks are candidates at this time. I bought those with (almost) no expectations. LCID is a good example. I'm down 40%. But I have no idea what it will do - the company hasn't proven itself and was bought with the idea that if it went to 0, as my buy was small, it wouldn't hurt me much. No point converting something that could go to 0. So I'm looking at companies that have solid (or better) long-term prospects. If I were doing this today AMZN and NVDA would definitely be converted.
2) Set price targets to do conversions along with amounts. These are:
a) S&P 3500. This will be the first "tranche" and a fairly large one. I'm looking at roughly $70k. This would get my estimated 2022 income to around $130k, leaving me with $40k to stay in the 24% tax bracket.
b) Additional conversions as the market drops further. Right now my next tranche would be at S&P 3200. This would be for $10-20k depending on if the market starts to show signs of setting a floor. Once I make that buy I'll assess further possible levels though if I do $20k I may just sit until c) to leave me some wiggle room for Taxable Account transactions the rest of the year.
c) If the markets have a fairly quick recovery, something I do not expect, while I'll assess things on an ongoing basis, my final conversion will likely come late in the year to get me close to the $170k
I'll be making sure I'm staring at my PC at 3:30 this afternoon. I will be very surprised if today's pre-market rise holds and think there could be a heckuva drop late in the day - twitchy downward market going into a 3-day weekend? I'm as bad a person in the world as there is to pay attention to re this stuff but that sure spells late-day selling to me.
I will post moves as I make them. As a caution - once I decide something I often develop FOMO. Would I convert if the S&P starts bouncing around near the 3550 level for a couple of days? I suspect I'd ask myself what those extra 50 points are worth and do it, similar to when I sometimes buy a stock trading pennies above my target price.
NEW QUESTION: Could an in-kind conversion trigger a wash sale? Here's the possible (not likely) scenario:
I am looking at buying BBY at $65 in my taxable account. This would take me overweight. I have some shares bought in the high 90's which I'd sell after 31 days.
If I decide to convert BBY shares from my IRA inside this 31-day period, would the IRS interpret this as a stock sale? Doubt it happens - BBY is down some and I expect a nice recovery but not on the scale of some others.
*Very simple. The interface lists each holding in the IRA and gives you the option to convert some or all of it. The next point of curiosity is what price it gives me for converted stocks. I THINK it will be the price at the time I make the transfer but I've seen sites saying the actual transfer may execute a day or two later using those prices. I'll know when I know.
^Cash was available immediately. I won't know on stocks until I convert one.