Roth Conversions In Retirement

Roth conversions in retirement are becoming a very popular tax strategy. It can help you to realize income at a lower tax rate, reduce your RMD’s, accumulate assets tax free, and pass Roth money onto your beneficiaries. However, there are pros and cons that you need to be aware of, because processing a Roth conversion involves showing more taxable income in a given year. Without proper tax planning, it could lead to unintended financial consequences such as:
• Social Security taxed at a higher rate
• Higher Medicare premiums
• Assets lost to a long term care event
• Higher taxes on long term capital gains
• Losing tax deductions and credits
• Higher property taxes
• Unexpected big tax liability
In this video, Michael Ruger will walk you through some of the strategies that he uses with his clients when implementing Roth Conversions. This can be a very effective wealth building strategy when used correctly.
Contact Michael Ruger with Questions: 518-477-6686 or [e-mail]
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[@robwelch7442]

I've reviewed a number of videos on this subject. This is one of the best I've seen. Direct, to the point, and covers most of the important factors in what is a pretty complicated decision for most retirees. Thanks for the excellent presentation.

[@FlaschDJ]

OK. I’ve listened to a dozen or so Roth presentations. This guy’s INFORMATION is outstandingly to-the-point, ACCURATE, and impactful - he covers all the relevant topics. EXCELLENT. I almost made the mistake of skipping it because it was plain (not “slick”). Top quality. Fine. Thank you.

[@Kryplogic]

Awesome information. Very direct and easy to understand. It's given me a lot to think about. Thank you.

[@christinad1651]

Great explanation. Thanks!

[@meesacreef]

Thank you for this video explanation.

[@jamesallen8107]

Good info. Wish I'd had this info in this summarized form when I retired 6 years ago :). I researched, but didn't get the info in one place like this. Another consideration impacting affordable care premiums in my case, involved taking an immediate annuity using IRA funds that increased reportable income. I could have received subsidies if I'd delayed some of the annuity funding. Although there are multiple considerations that fit together - annuity rates/returns declined some later, and I would have had to delay the roth conversions as well to allow me to get the reduced affordable care premiums. But I learned here, I did not realize, that medicaid spend down would not require spend down of non-Roth IRAs, as noted in this video. Thanks for the good info.

[@MikeNaples]

Correct me if I'm wrong but Medicare premiums are based on income from two years prior. Also if 59.5 or older the "five year rule" does not apply to Roth conversions.

[@coleenwinslow7822]

Michael, I have been thinking about this for a while and this was very helpful. I will give you a call next week. Thank you

[@elainenilsson5472]

WOW, this is the video I have been looking for. I am 59 and sent into retirement as a widow. So, right, I need a tax advisor.

[@dmoon9037]

1:32 the best planning answer is that you have to have a plan when you make that deductible contribution back in the day - for some folk, it’s too late for planning when you are within shooting range of required distributions and the traditional dollars are a tax monster - appreciate the Roth conversion tactic, do the best you can

[@connersyhouse6480]

You may have covered this somewhere so I apologize if I missed it. Wondering about what I think is called the 5 year rule. If older than 59 & 1/2, when moving money from a 403b (pre tax) to a Roth IRA over a few years (to stay in the same tax bracket), do you have to wait 5 yrs after each deposit to withdraw $ or just 5 yrs from the initial deposit? I.e., if move $ in 2023, 2024, 2025, etc could all the money be withdrawn in 2028 or would you have to wait till 2029 and 2030 for to withdraw the money put in during those later years? Thanks much!

[@greenbushfinancialgroup]

For the Roth IRA, the 5 year rule states that in order to withdrawal earnings from the Roth IRA tax and penalty free, you have to be 59 1/2 or older AND the Roth IRA must have been established at least 5 years ago. So there is not a 5 year clock for each conversion. The Roth IRA just has to be in existence for at least 5 years. You could establish a Roth with $1 in it today, 5 years pass, then you begin processing conversions into the Roth IRA, as long as you are over 59.5 when you withdrawal money from the Roth IRA, no taxes or penalties. (Comment is for education. Not advice)

[@johnd4348]

Who knew having large amounts of money would be a problem. Way too many decisions.

[@scottstebbins1712]

Get long term health insurance at age 60.

[@PH-dm8ew]

If i am 60 retired and retired with 1.2 million in deferred accounts with only 45000 in cash, and a 32000 a year pension, would it still make sense to convert large amounts to a roth pre 72?

[@johnd4348]

I would say yes if you can live on your pension. But I'm no expert . I myself will just pay the taxes. I have just a IRA for retirement so either way I pay taxes on it.

[@joannemarion9553]

This is so interesting! Thank you!

[@bradleys2320]

liked your final point about Medicaid spend-down in the context of Roth conversions. Unfortunately I had to quickly learn about Medicaid last year when suddenly submitting a Medicaid application for my father entering a nursing home for LTC. I'm 55 now, and considering converting and contributing to a Roth IRA as the account from which to be self-insured for LTC self-pay, avoiding Medicaid altogether as well as avoiding the sunk cost of LTC insurance. Is that a good plan?

[@vc6036]

It's a good question. I wished someone would have answered it.

[@dstuck6368]

What about converting to a Roth in the “sweet spot”. Right after retiring and the income has dropped to include your tax rate then convert to Roth prior to starting Social Security and before 65 when Medicare kicks in?

[@greenbushfinancialgroup]

You’re right, there is that sweet spot before you start collecting ss and Medicare to process these conversions which is why we mentioned in the video part of the strategy may be to push out your SS start date. (Comment is for education. Not advice)

[@toreckman8899]

That’s what I’m doing now. I’m 63. My concern now is how much my Medicare premiums will go up by taking this income after 63. Seems to me the way to beat the system is to stay healthy.

[@peterhoffman8525]

@@toreckman8899 We have been looking into this matter also. We are told that the medicare premiums will be increased only in the years you go into the 'high income' bracket--not permanently, thank goodness.

[@toreckman8899]

@@peterhoffman8525 👍. Thanks !

[@remowilliams7569]

@@toreckman8899 For a single person, your income needs to be below $88k to not have premiums increase. For married people, the income level is $176k. It has to be below these income levels for the years between age 63 and 65.

[@anwrsky7251]

من الكتب التي تستحق القراءه أعمدة الحكم السبع القلاع الصليبيه للورنس العرب

[@daveboyer5288]

My wife and I are 73 with combined IRAs totaling roughly $1 million and a stock portfolio of $1 million +. Should be converting to ROTH IRAs and if so, is there a five year holding/waiting period for funds placed into the ROTH?

[@FlaschDJ]

I’m pretty sure (but verify): - No holding period on the contributed or concerted amount (you already paid tax o. It). Yes, there’s a wait 5-year waiting period to withdraw the gains (earnings).

[@johnd4348]

If your over 59.5 years of age there is no 5 year holding period.

[@dins5066]

@@johnd4348 lol you couldn't be more wrong 🤣

[@jimdavis9581]

There is a holding period of 5 years for taking out earnings even if your over 59.5, but there is never a penalty for taking out your "contributions" from a Roth. The penalty is only on the earnings part from the Roth.

[@wesm3848]

Fallacy #1, I am not going to be in a lower tax bracket in retirement, maybe slightly lower at best. I am currently in the highest tax bracket and with over 2 million in IRA/401k accounts I will have a lot of income flowing from RMD's at some point. I am currently paid a small pension of $20,000 annually adjusted for inflation annually, and dividend income over $20,000 annually. My SS at FRA will be $3,000 a month in a few years if I start, or more if I wait until 70. Also some other income when I retire from investments related to capital gains. I have considered conversions but would be taxed at the top rates and don't see the point. This is no deal. When I do start part B medicare my adjustment due to my prior two years of income is also problematic. I have no ROTH money and I think the biggest fallacy 30 years ago we were told was save in the IRA/401k plans because you will be in a lower tax bracket in retirement. As a CPA and one that understands tax law and investing, I don't see any way out of this jam. Could be worse, but I hate it when I hear "you will be in a lower tax bracket when you retire".

[@mlee1308]

Same. I’m 56. I have 3.5 million in my 401k. Now I’m realizing I’m going to be in the highest tax bracket. I had to do my own excel calculations, since I can’t find anything out there. To calculate my withdrawals from 401k. If I make 8 % a year, take out 4%, what will it look like year to year. When I’m 75 yo, I will taking out $600 k a year . Nuts. Who knew???? Does anyone know where I can find calculators on what it looks like taking out distributions through the years???? Please help. Thanks.

[@allanc9472]

@@mlee1308 I am in the same situation but I am at 60 so I have 12 year before RMD kicks in. The plan is actually to convert a certain amount to the ROTH IRA each year to fill up to the your desired tax bracket, for example up to 24%. You have 16 years to start converting to ROTH IRA each year. Hopefully when you are 72, RMD will not be that huge. Basically even out your tax bracket each year before RMD kicks in.

[@drewbaughman7129]

I am in a similar situation and am now 65. I agree it’s a myth we will be in a lower tax bracket in retirement as I am not with my pension and my and my wife’s SS and we are also drawing down a small percentage of my wife’s IRA. We are lucky to have my pension, which I look at as interest on bonds so I am heavily invested in stocks-mostly index funds-which have gained an insane percentage over the last 12 months. I did my first Roth conversion last year after being retired a year or so. It was a sizable roth conversion and I plan to do the same every year, really big conversions, over the next 5-10 years or more so that over the next 20 years I hope to live that money in our Roth IRAs will double a few times and our two kids will inherit much more tax-free money than tax-deferred money that they will have to draw down within 10 years according to the new law and their taxes may go up. I have advised both of my kids to put all of their retirement money in Roth IRAs, something that wasn’t always available to my wife and me.

[@patrickh9910]

Agree, I'll be in a higher tax bracket when I retire in 4 years even though we are not any kind of professionals with high income. Our taxable income for the past x number of years has been reduced substantially by deducting our 401k contribution to the max, and other tax deductible withholding such as FSA flex plan, commute expense, etc. Our RMD, two SS, and a small pension will result in a much higher taxable income.

[@jimdavis9581]

With an IRA that large, you will save money by converting a portion now! Why, because rates will be higher in the future than today. Taxes on that IRA will be paid to the IRS and if you delay conversions, you will just pay a higher rate in the future.