IRA to roth conversion?

I'm planning to convert part of my IRA into Roth since the value of stock is so low, I might just pay taxes now. I'm 39, and I'm at 25% tax bracket. I was planning to convert all I can before switching to the 28% tax. I'm a resident of CA so I have 9.5% on top of that. I'm asking for suggestion and if this is a good idea or not? I understand I need to come up with the money to pay taxes, and I have that (but I just could invest that money in the market).

Suggestion?

Thanks and sorry if this is too basic question,
Ferrari

Ferrariwin,

I think you have a great idea, and the timing is right.

Converting from a TIRA to a ROTH IRA now will give you tax free growth until age 59.5 or beyond.

Investing your savings is also a good idea, but you will be paying tax on your gains every year. Or you could get to deduct your losses.

A single filer with taxable income of up to $78, 850 will have a top tax rate of 25%.
Filing MFJ with taxable income of up to $131,450 will have a top tax rate of 25%.

Another advantage of the Roth IRA is that it has no required minimum distributions. If you convert a IRA to a Roth IRA, you have to pay income tax on the entire amount at the time of conversion. Your tax advisor can help you weigh the costs and benefits of a conversion for your specific financial situation.

If you are going to retire outside of CA, you can probably save the 9.5% state tax by waiting. Don't be in a rush to convert at 25% tax bracket unless you expect to earn LOTS of money in coming years and retire to the same lifestyle.

Life has a funny way of rewarding patience. You might have a year where you lose a job and are in a much lower tax bracket. I would wait for that opportunity.