2024 Income Tax Brackets, Roth IRA Conversion

[@Erikkurilla01]

I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.

[@bahijarhafiri]

Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.

[@KentBrono]

Both have their perks but you can also save for retirement outside of a retirement plan, such as an individual investment account or employing the services of a retirement planner/financial Advisor.

[@jessicasquire]

How can one find a verifiable financial planner? I would not mind looking up the professional that helped you

[@KentBrono]

My CFA Julianne Iwersen Niemann, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.

[@jessicasquire]

Found her online page by searching her full name, I wrote her an email and scheduled a call, hopefully she responds.

[@July.4.1776]

Hans nice presentation as always! Love the old school whiteboard.

[@stevemlejnek7073]

I retired early at 57. I'm doing Roth conversions, but doing it just within the 12% tax bracket. My retirement projections show me staying in the 12 or 15% tax bracket, so it doesn't seem wise to covert more and put myself into higher tax brackets just on conversions.

[@davelavigne2133]

It depends on your brackets and amount in your TIRA when you have to take distributions at 7.5

[@joycewright5386]

I always love your charts. They are so easy to follow.

[@CardinalAdvisors]

@@joycewright5386 Thank you

[@michael7054]

True

[@johndevos9003]

Excellent video very easy to follow.

[@hugozepeda6074]

I’m amazed more Americans aren’t subbed. Love your content!

[@rick7972]

I think the chart should state "IRMAA starts at top of 22% bracket", correct? Love your videos!👍👍

[@Satjr35031]

It starts at $206,000 for 2024 $103,000 single

[@1dash133]

@@Satjr35031 The 2024 IRMAA brackets apply to taxable income year 2022 due to the two year lookback methodology that Medicare uses. So, while it is true that 2024 IRMAA brackets start at $206K, the real issue is how do you structure your Roth conversions this year while avoiding or otherwise minimizing 2026 IRMAA penalties. And for that, you'll need a crystal ball because the latest IRMAA brackets that the government has released are for year 2025.

[@77magicbus]

Great video guys. I just realized by looking at your tax brackets for 2024 that I can do another 100k + conversion for 2024 and still be in the 35% bracket. Thanks

[@PH-md8xp]

Huge mistake, unless you are confident your future RMDs are going to push you up beyond the 37% bracket.

[@weiliwan]

How about IRRMA and social benefits taxable for this situation?

[@chumbawumba1959]

Great vid! You should change from saying "7 Worries" to **7 Opportunities** ☺

[@PH-dm8ew]

you can use the rmd's to pay the taxes to bump them up.

[@jps5272]

Great video Tom and Dad!!!

[@CardinalAdvisors]

Thank you!

[@1dash133]

This is a very simplistic overview of the ROTH conversion strategy. There are a host of factors to consider when doing a Roth conversion. You should independently consider all of these factors when making your decision. 1.Tax Brackets The biggest issue is whether pulling your money out from your IRA today (by doing a Roth conversion) will save you taxes versus regular withdrawal from your IRA later. What is the tax bracket today vs. what will your tax bracket be in the future. The basic issue can often be boiled down to comparing today’s tax rates (artificially lowered under the 2017 TCJA) against the pre-2017 tax rates. If you believe that Congress will re-authorize the TCJA before it expires in 2025, then maybe you’ll sit back and refrain from any Roth conversions. OTOH, if you think Congress will let the act expire in order to raise tax revenues, then now might be a good time to maximize your Roth conversions. 2.Required Minimum Distributions (RMDs) Feds mandate minimum withdrawal amounts at a certain age, whether you need them or not. This can wreak havoc in tax planning. You will need to manually adjust your RMD conversion ladder to satisfy whatever your choice of a manageable RMD level may be. 3.Double-Taxation Related to item no. 2, if you don’t spend your IRA withdrawals, you may be face the issue of cascading taxes (a.k.a. "tax drag"). Funds that you withdraw from your traditional IRA account THAT ARE NOT SPENT AND PUT BACK INTO ANOTHER ACCOUNT have their earnings taxed again. It is a second taxation, this time on the earnings of your withdrawn funds. And the unspent earnings earn further dividends/interest which, in turn, are taxed again. Year after year. Meanwhile your RMDs get bigger and bigger, compounding the problem. 4.Unanticipated (Emergency) Withdrawals Unexpected large emergency expenditures can have terrible tax consequences if you need to withdraw the funds from your traditional IRA account. OTOH, the tax consequences of withdrawing from a Roth account is zero since you've already paid the taxes on those funds. (I had to take a $250K emergency withdrawal a couple of years ago. It cost me $3K more in taxes and $5K in IRMAA penalties, compared to a properly constructed Roth conversion ladder.) 5.Widow (Widower) Impacts In comparing relative tax impacts of Roth conversions, most people fail to consider the impacts should one of the spouses expire. All the brackets change (income tax, IRMAA, SS exemption, Premium Tax Credit, etc.). 6.Income Related Impacts If you’re subject to programs or benefits that use income as part of their criteria for eligibility, then you should consider their related impacts when doing a Roth conversion. In particular, you would want to avoid any spikes in your income due to unanticipated or emergency withdrawals. Items affected: a) SS benefits, taxable portion dependent on AGI b) IRMAA brackets, Medicare penalties c) Long Term Capital Gains d) Retirement Savings Contribution Tax Credit (Saver's Credit) e) American Opportunity Tax Credit f) Earned Income Tax Credit (EITC) g) Dependent tax credits: Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), Credit for Other Dependents (ODC) h) Education tax credits: American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) i) Premium Tax Credit (PTC), subsidized under the Affordable Care Act j) Student Loan Interest deduction k) Net Investment Income Tax (NIIT) l) Alternative Minimum Tax. m) Anything where qualification depends on income such as food stamps, housing, credit applications, financial assistance, health insurance, education programs, etc. 7.Volatility Well, not “volatility” per se, but I don’t know what else to call it. Dealing with the known has value. I can’t quantify it, but I believe there is value in controlling variables. IMO, controlling what you can control is better than leaving things to the gods (or governments) to decide. I sleep easier having done a Roth conversion, fixing the specific tax rate. Also, it simplifies my financial decisions in retirement, no longer guessing at tax rates upon withdrawal. Note: This is not an endorsement for blindly doing Roth conversions. This is merely the feather that tips the balance of the scales weighing upon the decision. 8.Legacy Your heirs will appreciate that they don’t have to trouble themselves with figuring out their tax burden, especially if you have multiple IRA and 401k accounts. I can’t opine for others, but having gone through the death of my mother this year and having to sort through her financial affairs, I can tell you that the LAST thing on my mind would be second guess her decision not to convert her IRA to Roth. I’m grateful for all the things that she did as a mother for me. Everything that has happened since ... funeral, inheritances, reconciling financial accounts ... are just issues that need attending to. They have nothing to do with my memories of my mother. However, having gone through this process, I would save my son the trouble of filing taxes on my retirement account. It is a trifling detail, but one that I’d like to take care of. 9. Opportunity Costs There’s time and resources needed to implement any plan (including the effort needed to create and manage the plan). Is it worth doing? Would you be better off putting the time and resources elsewhere. E.g., at this stage in your life, would you be better off buying a new car or taking a fancy vacation than trying to save a few thousand dollars in taxes. 10.Timing. The key is to start doing the conversions early enough, when you have the flexibility (tax bracket overhead) to do so. Preferably, you'll do your option planning well before RMD age. Some calculators can build a Roth conversion ladder, spanning a number of years. However, no one can decide what timing works best for you (not without you specifying the limiting criteria, anyway). Only you can decide how you want to phase conversions.

[@PH-md8xp]

It doesn’t make sense to do Roth conversions unless your RMDs (Age 73 or 75) along with your additional income (Social Security, Pensions, Interest, Dividends, etc.) is going to push you into a higher tax bracket than you would pay on your Roth conversions now.

[@richardmarshall210]

All things being equal, if you can pay your taxes from a conversion with after-tax dollars and not the IRA itself, you will get a higher after-tax rate of return by converting.

[@MyStuff92630]

Very useful information, could it be appealed in SSA-44 to deduct gambling losses from IRMAA as stated in Schedule A.

[@tszczerbinski]

My understanding is that there is also a waiting period (w/o penalty) of 5 years after the year of conversion (2024 conversion required you wait until 2029 to make a withdrawl with out penalty). I assume this would also include distributions from the conversion as well.

[@stevemlejnek7073]

The 5 year conversion rule is only if you are younger than 59 1/2

[@rickdunn3883]

nice job on this.

[@CardinalAdvisors]

Thank you

[@pauld9653]

Yes , taxes are going up by law if nothing is done in 2026, the double whammy is that the standard deduction is going down too.. it will be interesting to see what if anything our inept Congress will do about any of it. Lots of guessing in the planning part of this.. how long will you live, how long will one spouse outlive the other, what is the tax bracket of heirs that get the ira, what will happen to tax brackets, and you forgot to mention NII tax that RMD's may put you into also. Putting bonds in IRA and stock in taxable accounts so the IRA grows slower and the taxable account grows faster in the cap gains rate..

[@josephramus2392]

If a person is required to take a RMD because of his age and he has done that can he fill their bracket by doing a Roth conversion wth the amount to fill that bracket ?

[@gg80108]

Seems like once you start taking SS the game is over for you to see any benefit in your lifetime, you are doing it for heirs. Except if your heirs are in a lower bracket, very little benefit while you take the tax hit.

[@1dash133]

So, what (exactly) are the IRMAA brackets that you used to strategize a 2024 Roth Conversion? It is NOT the top of the 24% tax bracket. What is it???

[@dallasmonteau8143]

So using the income tax brackets in your examples, can you back out any qualified dividends (taxed at 15%) from the income to determine the amount of a Roth conversion you may want to make up to $191,950 (single)? For example, say a single filer has $200,000 in taxable income, but $40,000 of that income is from qualified dividends . . . the Roth conversion one should consider is $31,000, right? Does that make sense (given Roth conversions make sense in this scenario)?

[@denniscain7155]

Great information on this IRA to a Roth, I have just completed my 5th year of this conversion; the issue that I haven't heard covered is any current non-Roth IRA's is how is the current money is invested, I was 60%-40% stock market-bond (income) and I finally (this year) converted all my 401(k) to a moneymarket because any amount I converted to a Roth I made back in the stock market returns throughout that year, so I wasn't reducing my IRA...maybe I'm missing something but as I see it, it is difficult to reduce the IRA to a Roth without doing something like this?

[@randolphh8005]

So you are trying to avoid gains in your IRA to avoid taxes? That makes no sense at all. Even when you pay taxes you still get a majority of the money in your hand. Losing a dollar to taxes is better than losing a dollar to gains. If you really just hate paying taxes, donate your RMDs to charity instead, avoiding all taxes.

[@leisure057blank3]

Yeah, I am trying to avoid IRMAA. I am just putting it off for a bit. I am a single. I only have three more years before I have to start pulling ss.

[@Satjr35031]

By the time you’re 65. The first IRMMA for single my be $150,000

[@leisure057blank3]

@@Satjr35031 well I am actually 66, so I think it’s just a futile attempt.

[@rodneylw10]

I have a question. I am a teacher with a pension and social security. I retired Friday at 62. I am not getting Soc Sec yet but will next month. I have over 127K left in two 403b accounts. I am single and have thought about converting it to a Roth but I am not sure it would make that much difference for me. I have CDs well over $175K now and savings of $72K. Would you suggest combining the $127K 403b into an IRA or Roth conversion? I live in FL so only federal tax. Thanks.

[@CardinalAdvisors]

Rodney. Not knowing the size of your pension and Social Security check? Most likely, you will not pay a lot of income tax. So Roth conversion, all at once, would cause your taxes to go way up. A possible alternative is purchasing an income annuity with the $127k that will pay a monthly income for life? Thank you for teaching kids all your life. I won’t charge you if you want some advice over the phone. Hans

[@kidmangu200]

​@@CardinalAdvisors you are very kind Hans ❤

[@captarnie114]

Where did you get your IRMAA brackets from? rick7972 is correct and you need to correct it in your youtube video. Great info except of IRMAA brackets and if your on medicare it could be a BIG surprise.

[@CardinalAdvisors]

In the show notes irahelp.com/wp-content/uploads/2024/01/2024-GRAY-Medicare20Planning20Chart-FINAL-12-5-23.pdf

[@joemccarty2061]

If the tax brackets do indeed change in 2026 to where they were in 2017, will the income for each of those brackets be adjusted for inflation, and be increased from where they were in 2017? The brackets going up 3-4% is only half the problem. If those income thresholds don’t change to the upside, it will mean a considerably higher tax bill for most in the middle class (22%/24%)? Just curious if the income thresholds will likely change with the tax brackets? Enjoy your videos! Thank you!

[@CardinalAdvisors]

@@joemccarty2061 The brackets in 2026 will be the same as 2017 but inflation adjusted for 9 years

[@mikeb6386]

If the market drops, that's when I plan to convert a portion of my IRA to a Roth. The problem is I have 1.2 million in my IRA, so even 100k conversion won't do much to keep me out of paying IRMAA. I am single and my 2024 income is around 100k counting my pension, social security and brokerage account.

[@Jenzelifer]

Nice problem to have😊

[@mikeb6386]

That is what is holding me back from converting the IRMAA. One year I converted about 100k and my Medicare went to about 600 a month. Sick over that. I had to pay a lot of federal tax that year over 30k.

[@Satjr35031]

@@mikeb6386That not how it works from the numbers you provided

[@timothyflannery594]

Nice video. I think in general it’s good to convert given the current tax rates. However, no one knows where tax rates will be in the future. Everyone thought the Bush tax rates would expire under Obama. They did not. If Harris wins, unlikely the tax rates will go up for the vast majority of Americans.

[@PH-md8xp]

@@jaguarreal9116 not true, there are considerable benefits to converting during a down market on the amount of tax paid. Go watch some of SafeguardWealthManagement videos for a more detailed explanation of how that works.

[@farceplay4878]

When you say that you might want to consider taking a higher conversion if your taxable accounts are higher, what is a "higher taxable account" man? I'm looking at a dollar amount.

[@gg80108]

Seems like once you start taking SS the game is over for you to see any benefit in your lifetime, you are doing it for heirs. Except if your heirs are in a lower bracket, very little benefit while you take the tax hit.