Roth Conversion Ladder: How Marital Status, Tax Bracket & Stock Market Affect Outcomes in Retirement

Roth IRA Explained: Our last video received an overwhelming response with nearly 100 comments and counting! So, we made a follow-up video to answer your biggest questions surrounding the intricacies of the Roth IRA Conversion Ladder strategy and its benefits. We answer retirement planning questions about how the Roth Conversion Ladder works for different marital situations, tax brackets, upcoming potential policy changes, differing stock market conditions, and much more.
🏃🏻 Jump right in:
01:18 With the numerous bank failures as of late, am I better off reinvesting my retirement savings in the stock market or do I wait?
06:30 How does the Roth Conversion Ladder work for single people?
07:10 How does the conventional strategy drag you into increasing tax brackets, IIRMA thresholds and possibly NIIT (Net Investment Income Tax)?
09:49 What rate of return are you assuming for the investments? How would Roth Conversions be navigated if one was still employed?
13:08 What happens with Roth IRA Conversions if one spouse dies much earlier than expected?
19:42 Under what circumstances would it pay to continue the ladder until everything is converted to Roth? Is it a large taxable account you can live off of? What if you don’t need the RMDs?
#rothconversions #taxplanning #retirementincome
🍿Check out the original video where we answered, “What is a Roth Conversion Ladder?” with a few case studies modeling how it can save you up to $600k in taxes. It includes the basics of income distribution planning, tax strategy, and Social Security optimization so you can navigate your own retirement planning with heightened financial visibility and potential savings. Watch that video here: • I’m 60 with $1.5 Milli...
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Disclaimer:
This video discusses fixed-income investing and utilizes the 10-year U.S. treasury as a general representative fixed-income investment. Conclusions reached, opinions stated, and downside risks and potential returns presented should not be construed as applying to other types of bonds or fixed-income assets. Other types of fixed-income products carry different levels of risk and return potential and should be evaluated as an element of a diversified portfolio with your specific risk tolerance, investment objectives, and timeline in mind. Nothing in this video is investment advice, an investment recommendation, or an offer to buy or sell any security. Investing involves risk.

[@OakHarvestFinancialGroup]

➡ Do you need a Retirement Success Plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at [phone] or fill out this form for a free consultation: click2retire.com/schedule

[@jerrylabat550]

You mentioned the concept is the same for single versus married is the same, the big difference with married is doing Roth conversions while married to cut the tax rate in basically half. This makes the married Roth conversion more strategic to avoid higher taxes after a spouse dies.

[@Dave-sw2dm]

What happens when a spouse dies? A qualified widow is the same as married filing jointly.

[@jerrylabat550]

@@Dave-sw2dm only for 2 years, then it is the same as single.

[@Dave-sw2dm]

@@jerrylabat550 , well that sucks. My wife will have reduced income from my pension and SS, and now have to pay higher taxes. She needs to start taking better care of me and demand I take better care of myself. ;-)

[@Dave-sw2dm]

@@jerrylabat550 , guess I will try and do max conversions while hoping to live at least 10 years in retirement before I go. That should keep her in the lower bracket for 2 + N number of years I live.

[@OakHarvestFinancialGroup]

The law allows a surviving spouse to file jointly only in the year of death unless there is a qualified, dependent child- then it's two years. I've always felt this is an unfair part of the tax code. It's not uncommon to see taxes actually increase because of going into the single brackets, even though there could be less income from losing a SS check. Roth conversions while alive can be one strategy to mitigate this impact. It's part of the overall calculus in determining the appropriate tax strategy to consider in retirement. Thanks for watching and commenting!

[@randolphh8005]

A NICE EVEN HANDED APPROACH! The concept that paying no taxes in retirement is good, sounds correct, and most people want that. However, it is counterintuitive, yet correct that paying ALL your taxes up front may actually be more expensive in the long run. You can covert too much, and “tax free growth” is a misunderstood concept. Absolutely most people should have a significant amount of Roth, but the actual ratio depends on tax brackets when contributing and withdrawing. In general those with higher worth benefit more than those with more modest portfolios. If you expect to be mostly in the teen brackets, Roth CONVERSIONS will be of little benefit, whereas Roth CONTRIBUTIONS in the teen brackets are virtually a “no brainer” while working.

[@EdNichols-qj4xk]

It makes sense to convert when the market is down from a percentage standpoint but it also eats a larger percentage of the portfolio to pay the taxes unless you pay taxes out of a separate account.

[@OakHarvestFinancialGroup]

Hi Ed! Thanks for watching and sharing your perspective!

[@Nicolewhit]

How do most of you guys still make 💰profit, even with the downturn of the economy and ever increasing life standards

[@AndreaJohn1]

Investing in individual stocks can be a lucrative strategy, but it requires careful consideration and research.

[@goyadomo]

As economists have shown time and time again it requires luck and that's it.

[@OakHarvestFinancialGroup]

Hi Andrea, absolutely! Investing in individual stocks can offer the potential for significant returns, but it comes with risks and requires careful planning. Thanks for watching and commenting!

[@whitefordfalcon2359]

Dollar-cost-averaging is an emotional action - you CANNOT time the market. It has been proven that (with a longer-term investing perspective), the return outcomes favor lump-sum investing in a diversified portfolio over DCA.

[@user-lz4cf9pm6j]

My wife and I have a specific future scenario starting in 2026, which is when we plan to start social security. Our total projected income needs will be 90K annually. Projected social security for me and my wife should be close to 60K annually, so the remainder of 30K will be drawn from traditional IRA(20K) and a Roth IRA(10K). So in our calculation of provisional income, half of SS(30K) + traditional IRA(20K), or 50K, should leave us nearly zero in federal income taxes, given that standard deductions will continue to increase by 2026. Thoughts?

[@OakHarvestFinancialGroup]

Hi Lyman! Generally speaking, If you're filing jointly and your provisional income falls below the base amount ($32,000 for joint filers), then your Social Security benefits *may not* be subject to federal income tax. However, there are a myriad of other variables not mentioned that can impact your overall tax situation. To ensure accurate planning, we definitely recommend consulting with a financial advisor or tax professional who can consider all aspects of your financial picture and provide guidance based on the most up-to-date information and your specific goals. Give us a call to set up a complimentary consultation and we'd be happy to look at your specific situation! click2retire.com/schedule Thanks for watching and commenting!

[@jerrylabat550]

I believe your tax bill will be higher, I think your provisional income will also include your traditional IRA dollars as well, which will push a chunk of your $60K of social security into the 85% area. Social security dollars are the last item tallied in provisional income. Yes you only use 50% of it to determine the maximum rate, but that doesn't mean 50% is taxed.