Roth Conversion Ladder: Retirement Tax Rules + Strategic Advantages of RMDs and Partial Conversions

[@OakHarvestFinancialGroup]

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[@PragmaticPragmatic]

On not doing conversions, you not only have to look at how much taxes will you pay, but also how much taxes will your heirs will pay. If I die at 75 I won't pay any taxes since I will never hit RMDs.. My heirs are another story. If I die at 75 they will be in their peak earning years and in top tax brackets (hopefully their careers are that successful). So they will be paying top brackets during their 10 year withdrawal of the inherited IRA (or 401k, 403b, 435, etc). I'm doing conversions now so that if I live long I won't pay taxes on RMDs and if I die early my heirs will be able to keep all of their inheritance.

[@johnhaller5851]

Alternatively, if they are doing extremely well, and you would rather leave your money to the orphaned cat society because your heirs don't need the money, no one would pay tax on the IRA

[@Bondbeer]

If you have multiple heirs you can be strategic and leave the house and other assets with a step up in basis to the heirs in a higher bracket and the tax deferred assets to those in lower brackets.

[@blairmarkus3416]

Thanks Troy, for making time to create these educational financial series of videos! We have nearly $1M in a qualified pension and are looking to retire in 2028. Trying to get a good tax plan in place. We are looking at doing Roth conversions for roughly $500,000 in pretax 401K accounts. Hopefully, it's not too late for 2023, and we'd like to take advantage of the tax cuts before they expire in 2026. That should give us 3 years at $60,000 each to move $180,000. Unsure how we should handle the rest. Our taxable income is roughly $60,000 and we would like to stay in the 12% tax bracket, below the 22% tax bracket if possible. Will converting $30,000 in a fiscal year put us over the threshold into the higher tax bracket? TYIA

[@Bill-vk7fh]

Conversions must be made in the calendar year, so your too late at this point for 2024.

[@NicoleCarter3]

What is the best strategy to enter trading for someone with more or less than $5,000 to invest?

[@OakHarvestFinancialGroup]

Hi Evelyn! Investing involves risk, so it's essential to approach it with caution, especially with a smaller account size. The best general advice we can give is to start small with a couple of quality investments, and understand investing is a long-game. Try not to let greed or emotions cause you to make any rash decisions. Be prepared to learn from both successes and failures along the way. We definitely recommend consulting with a financial advisor or investment professional for personalized guidance. Thanks for watching and commenting.

[@Beatles4Sale.]

Over my lifetime before retirement I was only able to contribute to a pretax 401K over 30 years. When I retired I did a rollover of a million dollars. My wife and I have very little savings but do have a pension with Cola and SS putting us into a 22% tax bracket. When does it make sense to pay taxes out of the Roth IRA when you don’t have much money in a normal savings and checking account? Thank you for your videos.

[@johnhaller5851]

It's pretty much the same thing to have the money withheld from the IRA conversion as taken out of the Roth. You might get a little tax-free income in the Roth, but no more than one quarter's worth of income. If you converted 10,000, and had 2,200 withheld, you would have an extra 7,800 in the Roth. If instead, you converted 10,000 and then needed to make a 2,200 quarterly tax payment, and took that out of the Roth, you would still only have an extra 7800 in your Roth.

[@tpolerex7282]

The taxes you will pay in the future will have been adjusted for inflation so that $250-300k will likely put you in the same bracket/rates as $120k today.

[@Bondbeer]

Agree 100%. And you are paying with future inflation adjusted dollars. Also if you move to Florida in retirement or another tax free state you save even more.