Roth Conversions: When is Enough Enough?

[@Riggsnic_co]

With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.

[@Jamessmith-12]

For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.

[@kevinmarten]

I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.

[@JacquelinePerrira]

I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation.

[@kevinmarten]

Carol Vivian Constable is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment..

[@JacquelinePerrira]

She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.

[@petemclean8415]

Quality content, videos like this and insight from an expert really goes a long way.

[@finntomkins6825]

Couldn't agree more, their help is indeed vital, that's why I am being coached by one, Edwin Earl.

[@ethangavin5348]

hello Finn, i would also like to be linked to one.

[@finntomkins6825]

INVESTWITHEARL

[@finntomkins6825]

on telegram

[@Just_forfun9140]

2:20 Standard deduction for a single person is not 25,100, its 12,550 I believe. She probably meant for a couple.

[@Fishouta]

Yup

[@papasquat355]

And, will that change when the TCJA expires in '26? The SD may return to its previous much lower amounts.

[@captsorghum]

Right, $25,100 was the 2021 amount for joint filers.

[@DeVere80134]

Thanks for referencing the complexities and nuance of this topic instead of just lauding it’s virtues…probably the most balanced discussion I have seen on KZbin.

[@noahzimmerman-yg6qt]

I am 53 years old and consider myself to be a high earner. My job provides me the option to contribute the employer contributions to my Roth 401k. Should I do that or should I continue to direct that to my Traditional 401k ahead of retirement?

[@NowakJosef]

You're doing well for yourself but it is better to seek help from a professional. I am sure that an expert with experience provides more edge than a KZbinr.

[@marcellasilva4015]

As a high income earner can you easily afford to contribute max of $22,500 to your traditional 401(k) and towards retirement? What is your Federal Tax Bracket and percentage of company match? I f you don't know all this then its best you consult with an advisor.

[@ralfbrown-kl1gp]

Thanks for replying, You seem to know much, How did you go about it and can you recommend an advisor like yours?

[@marcellasilva4015]

Myself and a few other employees work with Sharon Ann Meny . She helps me max out on the Roth 401k in the month of November each year. My company matches 6% and I think my tax bracket is 22%.

[@GeorgianaScallion]

I just googled her now and I'm really impressed with her credentials. I reached out to her since I need all the assistance I can get.

[@RPCVCPA]

Excellent content, excellent delivery. It is unfortunate that she misspeaks at about the 2:20 mark and declares the standard deduction is $25,100 for a single person (It was $12,550 for 2021, and is $12,950 for 2022, with over 65 additions of $1350 and $1400, respectively). Don't know why that is not edited. The rest of the video is great. Not enough is said about hitting or avoiding the IRMAA cliffs.

[@jerrym3261]

Yeah, I hit the wall on that too! Then about 3:00 she says she's a math person. It gets me to, fool me twice, shame on me.

[@goodmanamana]

Dana you are very good at explaining this subject and retirement income in general. Thank You very much

[@GaryTrow]

Wonderful info from Dana. Somewhat complex since it covers everything from low income to high income for conversions taking into consideration possibly having extra Medicare payments or missing some subsidies on the low income side. Dana is smart and honest in her remarks and points out doing too much in conversions might not be smart. There is a lot of bad analysis on KZbin so she is very refreshing. Comments from reviewers seem like they are more knowledgeable about finance / math which is a good sign. My situation has been somewhat simple but I would totally trust Dana if it was more complex. I am a huge fan of the Roth IRA like Dana. I think a some mix of Roth/regular makes sense starting out or 100 % if in low income. At the same tax rate during producing and withdrawing years the math is equal for both IRAs. The Roth can be huge in keeping taxes low when extra expenses occur. My situation. Retired early. Taxed at 25 to 28% while working. Did Roth conversions mostly at 12 and 15% during last 15 of 20 years (4 more years to go). Lended 40k to family trust (10 years ago from Roth )to fix house before sale. Bought a car recently and used another 25k of Roth. Extra expense from my rectal cancer last year ( I am good now I think). Roth is huge in helping stabilize tax rates. Before doing these conversions I am sure we would be in the 22% bracket if either of us died. Also, conversions are cheaper in Vegas with no state taxes on the Roth. When we die our family will get tax free Roth’s when we paid 12 to 15 percent and they would pay a huge amount since distributions would be in addition to their current income. Big Smiles and thanks Dana, Gary

[@charlesgoepel8405]

Wow you did a great job of explaining the nuances of tax planning for Roth Conversions.

[@fredgrau1209]

I agree wholeheartedly with 98% of what Dana said in this video. There are MANY factors to consider in deciding when and how much to convert to a Roth. The 2% is disagree with is the "break even date" with a Roth conversion. That's because traditional IRA dollars do NOT equate to Roth dollars. $100K in a traditional IRA is only worth $76K in purchasing power when you're in a 24% tax bracket. In other words, $100K or an IRA = $76K of a Roth (24% tax bracket). If your tax rate is the same when the Roth conversion occurs as when you withdraw it in retirement, the break even date is day 1 (not 5 years or 12 years mentioned in the video).

[@Stashmo]

Not really, because you paid taxes from somewhere and that sum can no longer be invested.

[@Sensiblemoney]

The breakeven date takes this into account already. - Dana

[@kathimeci5179]

Misstatement at 2:22 - the standard deduction for single persons in 2021 was $12,550, with an additional $1,700 for TP who are 65+ or blind. She cited the standard deduction for MFJ, which was $25,100 in 2021, plus the additional $1,350 for each TP who is 65+ or blind. The best concept to get out of this video is what she says here: "It's not an easy answer. It's not a plug and play rule of thumb." There are many, many moving parts to consider.

[@Sensiblemoney]

Thank you!!!!

[@johng4093]

There are tools available to model various optimization strategies, where you select what to optimize for: highest end portfolio value, least lifetime taxation, etc. You can see how each one affects SS, IRMAA, taxes paid, end value, etc.

[@kevinkanter2537]

what are the tools? I have used a spreadsheet and have over past two years used sw RetirementPlanner. I use Dana's metrics of total tax but also retirement portfolio over my estimated life horizon, including levels of portolio for family generational weatlh ..... so custom --- This was a little better than the general hand-waving as I would expect of any conversation with Powell. But stilll i was hoping for more so will look up more - finally longevity & intergenerational wealth was mentioned

[@joycewright5386]

I converted a lot when the stock price was way down. The profit I have made since then in my Roth more then covers what I paid in taxes.

[@steves3234]

I want to keep enough in pre tac to fill the standard deduction about and stay in the 10% bracket at most

[@slimdawgwoof]

Smart lady! This is not a simple thing to measure. You also have to factor in going from married to single at some point

[@kimsnader8777]

Thank you for providing some useful info about modeling those choosing to retire in their early 60s and how it impacts Medicare premiums @65. This is exactly the math I'm working on to convert when and how much without increasing other costs in the short term, and potentially realize tax savings in later years.

[@edwinhargrave679]

Great job dana for explaining information in a very undestanding Analytical way continue the good work and thankyou.

[@als2cents679]

All these folks do not own brokerage accounts and CDs? What about taxable short/long term capital gains, dividends, interests, royalties, rental income, pensions, and social security creating retirement income?

[@ionfuel]

If a Roth conversion is made for a large amount, when should the tax be paid? During the current calendar year (i.e. estimated tax payment) or wait until next tax return that is filed and pay it then?

[@apga1998]

It is due and payable in the quarter in which you make the distribution("the conversion"), because it is considered taxable income. This payment is accomplished when you make your quarterly estimated tax payment. If you choose to pay at the filing date(ie April 15), you may be subject to a penalty. I hope that helps.

[@anthonyrichardson7543]

Dana does a nice job of presenting a multifaceted decision rubric for Roth conversions!

[@nancymartin9197]

If you know you will have an inheritance, you have to plan (the best you can) for that too. It gets even trickier not knowing the age at death of the giver and receiver.

[@virginiasanmiguel9930]

I’m actually trying to convert as much as possible but it’s a catch 22. I am paying a lot of taxes converting. As I get older I may not have money due to illness, surprises or other. The problem I will have is the monthly premium I get charged by Medicare will be very high due to them going back 2 yrs to determine monthly Medicare premium. I almost feel that we get penalized for our preparation to old age.

[@dmoon9037]

6:00 I concur; the Federal income tax code is not a simple construct - thus, any plan that seeks to optimize a tax profile to a given taxpayer’s objectives must by extension also not be simple; I find a zero Federal income tax objective a viable plan, but it really demands a strategic plan that spans 3-4 decades

[@toreckman8899]

But then your SS gets taxed if one just gets their rmds to standard deduction amount? I retired at 55 with no income at all after 2 year severance. Im 64 and have been taking the tax hit but only up to 12% converting to roth. This is the first year I have to take distributions so my conversions will be minimal as I stay within 12%. Market now is finally starting to correct. If it’s >20% I convert more. Add. Glad you brought that up about tax rates changing in 2025. That’s the driver behind my conversions. Plus. I don’t want to pay taxes on SS which will be about 5700 with spousal benefit.

[@bigtoeknee11]

One of the best benefits of Roth conversions (other than tax free growth) is the ability to have more control of your taxs.

[@StephenWaterbury]

Well done and thoughtful.

[@shannonodell6207]

You did not talk about the impact of IRMAA on these higher incomes as a result of conversions.

[@feartheturtle9618]

That is why it is important to stay in the 12% tax bracket.

[@sirreptitious6645]

How can anyone possibly calculate the “optimum” conversion amount when we don’t know future returns, future tax rates, future inflation, future expenses and how long we’ll live? These are all numbers that must be plugged into any model, but it’s all unknown.

[@larryjones9773]

Most future financial planning involves 'unknowns'. Use an estimate. Get comfortable being uncomfortable, with estimates. I'm in my eighth year of my planned eleven years of 401K to Roth rollovers. To manage this, I have a large Excel spreadsheet with all applicable estimates (itemized deductions, social security, 401K balance, etc), through age 95. My current age is 61 (retired).

[@lostinmyspace4910]

When it comes to health care subsidies, the government already has it worked out that they consider all income in determining whether you really qualify for the subsidy or not...The ROTH conversions hurt when you are trying to qualify for health care subsidies, but ROTH is forever...the subsidies eventually fizzle out when you become eligible for medicare...then you look at all your ROTH conversions you've done in all past years and say thank goodness I converted...because you don't owe a dime on any of that for the rest of your life.

[@DHGo-ex7ns]

Very interesting IRA ROTH conversion discussion. You've raised the big picture on what to do along with the individual situations aspects and what the government is allowing today as well as 4 years from today. 😀

[@kevinmchugh870]

You also need the cash to pay the taxes.

[@bobb7918]

In 2026 taxes are scheduled to go back up. May be good idea to do conversions over the next few years.

[@garydemille6103]

I am curious if the standard deductions could revert to the pre-2017 amounts.

[@captsorghum]

@@garydemille6103 Yes they will unless Congress changes something.

[@johngill2853]

Great video,do the math is right answer. I can't stand people saying 100% ROTH for everyone

[@steves3234]

I think all these formulas tend to fail to consider when do I have the cadh flow. When is it most affordable for me to take the tax hit. I feel paying more while I have a good paying job is the time to take the hit

[@gilbrook]

Excellent content. Excellent delivery.

[@tomr7222]

tax law adds unnecessary complexity on top of the inherit complexity of life and investing

[@larrywall9565]

I like the idea of color coding action plans into green, yellow or red. Simple and visual.

[@chesshead3943]

Lots of great considerations discussed here!

[@comingshortly]

I am not against converting for the right fact pattern but some things to consider before converting that make it less attractive. 1. State taxes. Will you move to Florida or another state with zero tax during retirement? 2. Time value of money. The taxes paid today are with dollars worth more than those paid many years in the future. 3. If you don’t convert, you won’t pay the tax all in one year. In fact, some of it is likely going to be paid after you die.

[@davidsensing2664]

Problem with the RMD equaling your Standard Deduction to net to ZERO is that the RMD could make your Social Security taxable. I don't see taxes ever going lower...only increasing. Being ZERO TAX when you are on a fixed income is HUGE. I will be debt free, including my home, ten years before I retire. All my retirement accounts are Roth. Based on projections, I will be able to live off Social Security and use my retirement account for emergencies or to donate to charity/family.

[@reneekoster4620]

If you plan to donate to charity, you should leave that money in a regular IRA and do QCDs! You don't pay tax on the money and still get the benefit of the standard deduction.

[@wilma6235]

What’s your formula? I do Roth conversions when the market is down, it more than breaks even in the same year.

[@Stashmo]

No guarantee of that.

[@mitchbandalan9450]

This video is great and an eye opener. For someone who is 10 years out from retirement, would it be better to fully invest in a Roth 401k/IRA and only contribute to a Traditional 401k just to get the employee match?

[@Stashmo]

Quite possibly. NonRoth 401k often works best if you’re young and change jobs fairly frequently. Then you can roll that money into an IRA and promptly convert to Roth.

[@frankkeel8410]

If you are retired is a Roth conversion a good idea if you take percentages over a period of years?

[@jakejake7289]

My goal is to do roth max conversions and still stay in the 12% federal bracket.

[@GaryTrow]

Yep. You’re the smart one. Avoid high tax rates while working then convert at lower rates later. For me 28 percent verses 12 and 15 percent during 15 of the last 20 years. Only 4 more years of conversions for me. Maybe I am smart like you.

[@MrAerialsound]

My understandings is If you are over 59 1/2 and convert a TRADITIONAL IRA to ROTH IRA. You can draw on the principle only and need to wait 5 years to draw on any proifit. So for example, I deposited 10k into a ROTH and the account went to 15k inside 5 years after my deposit. I can draw the 10k but will be unable to draw on the 5k profit until 5 years after the ROTH conversion?

[@Stashmo]

I believe you’re ok after 59.5.

[@williecarr1774]

How can I contact you in any ways for consultation?

[@johnbrown1851]

Having a decent amount in a Roth gives you options so you can stay in the sweet spot with social security, Medicare, Obama care and staying in a lower bracket. You can show less income in the years that are advantageous .

[@GaryTrow]

Great reply. The Roth is a huge help when you need extra withdrawals. I lent my family 40k to fix our parents (died) house before selling. This was 10 years ago. No tax diff. Lucky me.

[@shelveyholland8220]

I have about 400K in a 401K plus multiple Roth IRA's. If I decide beginning converting the 401K to a Roth IRA, is there any advantage or disadvantage to doing a direct transfer to a trad IRA (to be set up)? Or should I direct any conversion amts directly into one of my long-established Roths?

[@alrocky]

Are you still working and able to contribute max $23k/$30.5k to Roth 401(k)? Traditional 401(k) to t-IRA to Roth IRA is better than t-401(k) directly to Roth IRA.

[@2Greenlid]

If I have real estate & joint SS totaling $150K a year, but I have almost $2M tied up in our IRAs , does it make sense to convert as our tax rate is never really low?

[@lostinmyspace4910]

When you convert traditional IRA to the ROTH IRA, you virtually take the amount you want to convert and add it to taxable income, much like you'd include earned income, or bank interest. You are increasing taxable income and subjecting the conversion amount to your prebvailing tax rate. Talk to a tax person to understand the impact. Maybe paying the tax as you go along in life at this point in life is your best option. I converted everything annually when my tax rate was the lowest, and always kept under the radar of the higher tax rate. I knew when to cut off.

[@johnsdsl]

Your RMD's will be at least $73k or so, so you might as well convert up to the top of the 22 or 24% federal bracket, if you haven't reached RMD age. You might also want to convert on days (or months) when the stock market is down. You should also watch out for IRMAA brackets, NIIT and passive activity loss limitations.

[@billroberts9182]

I like the simple way a Roth IRA can be passed to your kids-Tax Free. Not only would I benefit from lower taxes during my life, but my kids will get 10 years of tax free investments from the Inherited Roth IRA which will be the high, earning years of my kids.

[@cliffluxion7019]

Very helpful. Thank you!

[@hoss6981]

My pension will be about 100k a year I’ll never be in a low bracket even when I retire

[@feartheturtle9618]

That is the “problem” with a pension. You can’t play around much with taxable income.

[@westonlee9778]

Very interesting How can I contact your office thanks

[@bryonsview]

What an amazing video

[@lostinmyspace4910]

If that client CPA is self employed, she could do SEP's to herself. In doing so, her business can deduct the SEP's as a normal business expense, thereby lowing her business profit. Her business pays her the SEP which is a traditional IRA, then at the end of the year, she can convert the SEP into a ROTH which doesn't affect her normal ROTH contribitions, and she only pays tax on the ROTH conversion on her 1040. She'd have to pay tax on that SEP money if it were reported as business income anyway, but she lowered her profit by creating that SEP expense. Then pay the tax on that SEP when she reports it as a conversion rather than profit on her business. It's like getting the ROTH for free. Why pay tax on profit when you can pay tax upon converting, and keeping that money from EVER being taxed again...in perpetuity.

[@donnasides4369]

@lostinmyspace4910. I have this very situation. Going to convert a small sep to Roth. Are you saying I can take the tax conversion as an expense to my business?

[@lostinmyspace4910]

@donnasides4369 ​When your business contributes the SEP to yourself, the business takes a business deduction for that amount. I would create an account called "Employee Benefits" in the business accounts. This lessens your profit on the business. You as an individual receives the SEP as a traditional IRA. At year end, you can convert that SEP into a ROTH by using Form 8606 reporting on the backside in Section 2. This amount then gets reported on Form 1040 line 4b IRA Distribution, taxable amount. To answer your question, you pay the individual tax as it's an increase to your income. The business doesn't pay the tax for you. BUT, the business does benefit by getting a deduction for the amount it contributes to you. I believe converting SEPS now is better than having to pay the tax when you're already retired and taking the money out ro live on. And as you know, there;s no RMDs, the ROTH is never ever taxed, nor is any interest earned on the ROTH ever taxed. Good luck. Any questions, let me know through here.

[@larryjones9773]

I'm 61, single & retired. I have $911,000 (49%) in my Roth, $185,000 (10%) in my Taxable & $757,000 (41%) in my 401K. I'm going to do three more years of Roth conversions, which should get my Roth to 59% of my portfolio. My average conversion tax rate is 12%, while my avoided tax rate on Roth withdrawals will be 42%. Hopefully, I have planned this out correctly.

[@i-postm4943]

Nice analysis! Nice job converting to Roth! I'm single as well. Being single isn't often covered by the so-called experts but should be. Did you use a tool to arrive at your numbers? If so, which one, please? I'm thinking my stock returns for the next 10 yrs will be not so great. If this comes to fruition, RMDs may not be as high as previously thought/planned. I have ~32% of my portfolio in Roth, hoping to get to 38% in the next 3 yrs. Then, in retirement, spend down my funds in taxable brokerage + trad IRAs.

[@larryjones9773]

@@i-postm4943 I just use an Excel spreadsheet. It has grown rather large due to all the variables. For example, I have all my tax numbers calculated through age 95. Along with my account balances and planned withdrawals, social security, etc. I'm trying to get my 401K balance to $0, by age 95. I updated my actual 401K balance with my planned 401K balance yesterday, & ironically the difference was 0%. Like you, I'm assuming stock returns will not be so great over the next decade, since this past decade has been so good. I had considered slowing my Roth conversions a little, but since my 401K balance is in line with my plan (after this year's stock losses), I just decided not to slow my Roth conversions. But, I'm going to re-evaluate this in a year (once I see how 2023 stock returns turn out). I'm in Texas (no state income tax), and plan to move to California (high state income tax), in 3 years, so this helped improve my 'spread' (difference between converted tax rate vs. avoided tax rate with Roth withdrawals).

[@i-postm4943]

@@larryjones9773Wow, all of that on an Excel sheet! Impressive. I'm using just the free and great Fidelity tool for now. Check It out. It doesn't tell how much to convert and when. But does consider it in the projections after you convert. It'd be nice to have but I don't really need a tool for that part. Since 2022 will be a lower income year for me + I have the cash to pay taxes on a 25-35k conversion + the market is down "enough". I feel this time period is sort of a gift. One last big chance to convert and buy more equities at lower prices before really hunkering down in retirement. Agree, this is a good time for you to covert more while still in cheapoer Texas. As we age, there'll be not much need for projections as we have reality. I want to take family and friends on trips while I'm alive instead of leaving them cash in my Will - assuming there's $ to do that. Would be nice to die with $0...I'll have to ask you later on how to get to $0. 😆

[@larryjones9773]

@@i-postm4943 I've converted $55,000 this year, but I just decided to convert another $20,000 in December. I found a small error in my spreadsheet, so I need to get this additional $20,000 converted this year. This will be my last year in the 22%/25% tax bracket. From here on, I'll be at the top of the 12%/15% bracket. In 2026, I'm going to have to quadruple my spending, in order to bring my assets to $0, by age 95. This will be tough, but I'm determined to do it. I'll be moving to CA in 2026 and buying a new home, so this will increase my spending.

[@donnasides4369]

Excellent Planning.....good that you started earlier than 65. After 65, is difficult due to IRMMA, SS, etc How could you get $911 into Roth and be in the 12% bracket. That one is escaping me.

[@lelaoliver521]

Fact is, though the 401k, IRA, name it are one of the safest retirement plans, they are not particularly good options. Better strategy; Live below your means, Invest 20-30% of your income into the stock market but of course, be well informed about where you want to put your money... I made my first million earlier this year from stocks alone with about 550k after I dissolved my 401k and added little cash (through the help of a pro though). Greatest decision I ever made.

[@patsyryan9316]

Now you have my attention sir How did you do this? Who's the knight in shinning armour? I am slowly giving up on all of these

[@patsyryan9316]

@@lelaoliver521 Low Blow right there ma'am. You didn't have to pull the gender card. Wasnt necessary. Thanks still. Ill check her out

[@lenamcgee2937]

@@lelaoliver521 Wow I know this little lady. Once attended a seminar she was also in attendance here in Texas,, Great speaker. I still think the 401k or putting it in a high yield savings account is the more reasonable option, given the economy,,

[@mrmoore9481]

@@lenamcgee2937 This right here is the second time I am coming across this name in a week. Came across her podcast and it was lit

[@beernutzbob]

Fact is, your advice is shortsighted. Why not take that 20-30% and put it in a 401k or 403b or 457 and get the immediate tax reduction? That money can go into the stock market as well.

[@MA-pp4pr]

I'm already 65 and I have no SS (though I do have retirement money from my State ret. fund). I hate to say it but..... Paying zero tax....living at or under the "standard deduction" (and extra, if you're above a certain age). LOL. It's not happening. Well, not for me. Besides, I have some REAL bills to pay. OK, Ok......IF.......all of my extra wealth (read as : retirement money) was in a ROTH?

[@TravelingTheWorld1993]

I am maxing out my Roth 401k. Yes I am not currently getting any tax savings. But my earnings and withdrawals in retirement will be tax free. Roth IRA or Roth 401(k) can help you save on taxes in retirement. Not only are withdrawals tax-free at 59 1/2 , it won't impact the taxation of your Social Security benefit and Medicare premiums.This is an important aspect of a Roth account that most people are not aware of. yes right now I prefer the Roth 401k! Because my effective tax rate is 19%. That is for state and federal combined.

[@ianollmann9393]

“Next 4-5 years” until taxes go up is actually 3 years.

[@maurico2two86]

---Once taxes are paid that money is long gone, goodbye with no opportunity for further investment growth. The idea that a person should covert their entire traditional 401K to a Roth 401k and thus pay all of those upfront taxes presumes that during their retirement years they will draw down their entire traditional 401k and thus would have to pay taxes on the back end on all of their tax deferred contributions and investment gains. ----Only if a person draws down their entire traditional 401k during their remaining life will they be paying taxes on all of their tax deferred contributions and investment gains. Normally, they will not draw it down entirely but will leave some portion (perhaps a considerable portion) of their 401K to their heirs. That portion can stay invested and continue the tax deferred growth. Thus, the retiree during their remaining life, will never pay back all of the taxes that they deferred, and their heirs, like them, will pay taxes only on the portions they draw down.

[@touchofgrace3217]

I would rather pay tax now on contribution than to pay tax on contributions and growth 20yrs from now. At that point tax rates don’t matter.

[@Borat_Kazakh]

She misses an extremely important point. Namely, if do a conversion of $250k at age 61, yes I might pay 34% tax rate. But you have to assume those conversion funds will be invested at 5% per year. Earlier invested funds will a) give you more flexibility at using them at earlier age, and 2) a greater expanse of time to amortize the tax paid with investment gains. The kicker is: years are more precious than money. I'd rather have $500k, tax free, at age 66 than $1 million at 72. The drop in vitality and health in those years is huge.

[@mainerin_texas-gordon-9598]

At 60 to 62, quit your 6-figure job and get a very low paying job. Each year move enough from pre-tax into a Roth, keeping the limits below IRMAA penalty limits. Make sure your low paying job has qualified health insurance if your spouse is not working. Push Social Security out until the Maximum, at age 70. Stay off of Medicare Part B and Pard D as long as you have health insurance. If you can make it to 70, you may not have any RMDs, moving all your pre-tax accounts over. No widow/widower tax trap. No RMDs to force on your heirs. At 70, starting Social Security, you taxes on it will be very minimal.

[@donnasides4369]

@mainerin_texas-gordon-9598 Love this advice, if I only KNEW. Assume you have money extra money to pay tax on the conversions somewhere because the small job will probably just provide for your living expenses.

[@mainerin_texas-gordon-9598]

@@donnasides4369 If you have a large (7 figure) 401K or close, you could use your 401K to pay the taxes. It is a balance and you cannot go crazy. You must watch your taxes and IMRAA carefully. RMDs come from pre-tax 401K, so one of the main goals is to bring this amount down. On the flip side, if you have a large 401K, the earnings on this could be above the RMDs, not causing the 401K to increase and keep increasing over time.

[@mainerin_texas-gordon-9598]

@@donnasides4369 Hi Donna, one other thought. If you have been earning a 6 figure salary over time (or close to it) and you calculate your Social Security when you retire, your income via Social Security will never match your 6 figure salary. I first figured out how much I should be earning to take a lower paying job. Then I found what lower paying job would meet that level. It turned out to be about 20K lower than what I will be getting with Social Security. I am holding off on SS until turning 70. You are correct, a low paying job may not cover basic living expenses, so you have to find out where your number is. Earning a lower paying job really assists with flushing out your budget/expenses. Thank you!

[@88888gerald]

when you dont have to pay any taxes..that is enough...

[@pku2death]

You don't have to take rmds on a roth

[@Ivan-nk9pl]

No

[@princesskaitlinhazelwood4703]

Well about 85% of your social security is also taxed.

[@Leonard369C]

Make it sound as complicated as possible. That way you will always need to pay someone to figure it out for you.

[@Longjohnsilver58]

“And you have a way of going about it to measure success of whether to do it or not…”. Yes, it’s called math.

[@stevewood1090]

On his face, you should always try to become tax-free in retirement. The idea that the federal government will not become more pernicious given the debt level is Pollyanna thinking. You can spend 30 years in retirement and the idea that your subject to taxes or even means testing based upon income scares the heck out of me and does all of my clients.

[@jdavis6650]

There is a small group of retirees that should avoid Roth conversions no matter what. If you are lucky enough to have enough money to last your lifetime ( and then some) a Roth conversion is the worst thing you can do. WHy would you want to pay taxes on assets that will pass tax free when you do?

[@dixter1652]

The elephant in the room... A roth conversion locks down your funds for 5 years.. and each Roth conversion has its own account and that new account starts the 5 year clock again... A roth conversion isn't for everyone... you might need that money in less than 5 years

[@johnsdsl]

The five-year lockdown applies to earnings on your conversion. It does not apply to the money you put in.

[@dixter1652]

@@johnsdsl you won't make any money if you take out the investment portion.... you should do the math to your remark... if you don't convert to a Roth then you will have more funds to invest in a IRA because you didn't give up your funding to taxes like you did for the Roth conversion.... and if you take out your investment funding from your Roth then the Roth isn't going to make the same as your IRA.... and now that you have taken your after tax dollars out of your Roth and invest it then its subject to even more taxes and capital gains..... think about what you wrote...

[@johnsdsl]

@@dixter1652 You misstated the law. I tried to correct you, but you don't seem to understand. I said nothing about tax or conversion strategy.

[@dixter1652]

@@johnsdsl you don't seem to comprehend english... I never said once that the money you put in you can't take out.... read it again... lets say you convert $100K into a Roth.... now with the $100K you buy Treasury Bonds that pay 6%... and you keep them for 3 yrs and you decide to take out the money you put in... so now your roth has $18000 left as you took your $100K out...(you can't get to the $18K, locked down for two more yrs) the $100K is now after tax dollars... so if you use it again to invest then everything you buy is subject to more tax... its not tax protected... see how you messed up ... now your Roth isn't making as much as your original IRA that you had the $100K in.... what advantage did you get with a Roth conversion.... I know the answer.. lets see if you come up with the same one

[@johng4093]

I think it depends on your age whether the converted funds in Roth are immediately available. And I don't think you need a new Roth account for each conversion.

[@ultramegasuper11]

So she is a “numbers person “ but won’t approach Zero Tax because the math is hard? Her work involves projections every day ! The truth is that approaching Zero Tax simplifies money management in retirement so much we don’t need to pay her thousands to do it.

[@lostinmyspace4910]

wait! Your a math person, so do the simple math. If you understand how to fill out a tax form and understand what the standard deduction is that offests income...what's the problem...just understand that anything over the standard deduction is taxable...simple math and understanding tax preparation is a no brainer. Bottom line, stay under the radar of the std. deduction...gezzzz lady... If by chance you have income a little over the std. deduction, don't cry over it. Thank God you can afford to pay the tax...as little as it is...it's a sign that you're a successful person.

[@fredgrau1209]

If you don't factor Social Security taxation, you are correct. However, Social Security taxation complicates how much income you can have to stay in the 0% bracket.

[@ernestogalvan143]

25000 for single standard deduction?

[@charleshughes2487]

Social security taxation …..don’t incorporate all the answers …did this improve your bottom line ? Liquidation. value Calculate over their lifetime total withdrawals needed for taxes …plan number of conversions till age 25 … Could be 5 years till age 72