Re: [TSPStrategy] Roth conversions

I should add that simply making a large payment at the end of the year to meet one of the safe harbor thresholds is not enough to avoid the penalty. You must meet the payment requirements throughout the year with quarterly estimated payments. See, https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

Tom

On Sun, Jun 22, 2025 at 12:19 PM Thomas Wellock via groups.io <thomas.wellock=gmail.com@groups.io> wrote:

More detail:

1) I noted that Boldin was more aggressive, meaning it had me take a pretty large conversion in the first year up into the 24% bracket and a higher IRMAA bracket for one year. This makes some sense since it is assuming that current tax rates will reset higher in 2026. Otherwise, it spread conversions out over about 7 years similar to Pralana. 

2) Are you sure you mean a 15% "effective" tax rate? Or, do you mean 15% marginal rate? An effective tax rate is an average rate for the taxes you paid to income earned. A marginal tax rate is the tax you pay on the last dollar you earned. So, if you earn just one dollar into the 22% bracket, that last dollar pays out 22 cents in taxes while all your other income is taxed at 12% or less. If you mean a marginal rate of 15%, then Boldin is likely taxing you in future years at the 15% bracket that is scheduled to return next year and replace the 12% bracket. It looks like Congress plans to keep rates at 12%, but until they actually pass legislation, 15% is still the law of the land as far as Boldin is concerned.

3) Regarding safe harbor: It is as you say. You avoid an underpayment penalty if you pay at least 90% of the tax you owe for the current year or 100% of the tax you owed for the previous year.

On Sun, Jun 22, 2025 at 5:52 AM Tsp novice via groups.io <red12blue=hotmail.com@groups.io> wrote:

Actually you answered one of my questions in that Pralana gave you roughly the same conversion amounts. When I convert at 12% I understand what boldin is doing. But when I convert at "highest estate value,," I don't understand why it goes to 15% effective tax rate conversion. Also I still have to work on understanding Safe harbor for estimated tax payment. Does safe harbor mean that if I withheld 100% of my taxes owed in 2024. There is no tax payment penalty if I under pay taxes in 2025 due to a Roth conversion

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