Should I do Roth Conversions with $2,000,000 in Retirement Savings at Age 62?

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@philblane5752 5 ай бұрын

I put together a spreadsheet that showed 35 years of pro-forma tax returns. Both scenarios: RMDs and then the conversion. It revealed a tax savings of over $1M by doing the conversion. But then I discounted the tax payments using present value and it gave me a completely different answer. Now it shows the conversion as costing about $200k more than doing RMDs. The complexity of this issue is enormous. These videos don't provide much help. Generally they describe what a Roth is and what a conversion is and some of the mechanics. Then the advice is to ask your financial advisor or tax preparer.

@sporter555 5 ай бұрын

You are exactly right. Time is money. By giving the govt their money in taxes upfront they can invest it at the same return you would have had and it becomes a wash. You better be sure your strategy keeps you in the lower brackets both early and late in your plan.

@swright5690 4 ай бұрын

Yes. But I have two planners give me opposite answers to the same question.

@leoburgunder9201 4 ай бұрын

I did the same dcf analysis and came up with the same results. But based on the 35T US debt and crazy politics, I'm going to do low $ conversions because the Gov has a lein on my IRA's. By doing low conversions we plan to stay in the 12-15% bracket up to age 75 until we hit rmd's and not try to convert the whole $2M. At that point we can do QCD's to abritage future tax brackets.

@DragonYang01 4 ай бұрын

I think the rule of thumb is how much tax rate differences during the remaining time. For example, if your income is maintained to get a constant tax rate, the conversion effect would be 0. So, the issue is how much you have in your 401K and other sources of income. If you don't depend on 401K for living, you should do Roth transfer based on the economy. For example, when the stock market crashes, you can do the conversion because the same shares are sold with less amount of proceeds, thus less taxes. When the stock market returns, the appreciation of the new investment is tax free. This is probably biggest difference you can make by Roth conversion.

@billstube3003 10 ай бұрын

Extremely thorough and objective analysis and discussion. I've been studying this topic as I am nearing retirement and have to say this is a great overview of the issues involved with Roth IRA conversions.

@TotalReturns 10 ай бұрын

Thanks for sharing. Very clearly explained and helpful in applying to my own situation.

@dads4514 2 ай бұрын

As with many videos on retirement, the "buy a new car" spike causes an unnecessary distraction. If you want a new car with cost C every X years, don't input C as an expense every X years (resulting in spikes), input annual cost of C / X, e.g. if you want a $42k car every 6 years, don't input $42k expense every 6 years, input an annual expense (i.e. expense accrual) of $42k / 6 = $7k expense annually; and Yes, this means pulling C / X out of your taxable account each year to smooth the tax accrual.

@gregstowe4595 9 ай бұрын

I may be missing something but all these videos on Roth conversion compare the tax savings over time, generally 20-35 years but no one looks at it on a present value basis. I am 63, single and have about $2.5 mm in a brokerage acct and $ 24:27 1.5 mm in IRAs and I’m doing the conversions mainly so my kids don’t have to pay elevated taxes in the future. I’m converting enough (about $70k/yr) to stay within the 24% bracket now assuming taxes will be going up in the future; even more than the rates expected in 2026.

@tedlaurvik3765 6 ай бұрын

@gregstowe4595, Please consider how the conversions could impact your Medicare Part B/Part D payments once you begin Medicare.

@larryjones9773 5 минут бұрын

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@carlhyman5540 10 ай бұрын

My question is how much are they converting each year in your example ? Great video and info

@pauld9653 10 ай бұрын

Seems to me roth conversions make the most sense when you will get hit by IRMAA and NII taxes because of RMD's in the future..as well as higher tax bracket

@sandylamba2546 10 ай бұрын

Well done!

@keithstreeter9054 3 ай бұрын

I think the Roth also makes sense if you do a conversion on 7 or 8 k every year and you’re investing in nothing but high yield dividend ETF’s only with no plan on touching the principal. Imagine paying taxes on an additional 7k/yr vs 100 to 300k per year on dividend payments in 20-30 years and then forever after that?

@reneekoster4620 7 ай бұрын

Fantastic video! Confirmed many of the plans we are implementing but we will probably do a few tweaks. Thank you!

@lisawilhelmy7953 4 ай бұрын

What about the effect on your medicare payments if you are within 2 years of age 65 (or 63)? Would a Roth conversion potentially hurt this calculation so that you have to pay more for Medicare longterm?

@Krunch2020 Ай бұрын

The actuarial tables for a couple show increased risk of one spouse dying is very high and then the value of the Roth conversion is multiplied. The taxes on a single person with this size portfolio are very high.

@zoomzoom3950 4 ай бұрын

While I'm working doing Roth conversions would be taxed at the highest rate; after I retire, same issue; I'd have to convert too much for it to make a difference, and then there's AMT. No matter how I look at Roth IRA, I take too big of initial tax hit up front vs on the backend once RMDs hit. My goal in retirement is to stay at or below the 24% tax bracket; and calculating my estimated RMDs each year to see if I have to make adjustments along the way. Any extra cash I have, I have to see where to put it, i.e., can I put some portion of excess cash into a Roth IRA without violating the contribution rules...

@Bwanar1 10 ай бұрын

Great Video!

@tedlaurvik3765 6 ай бұрын

No discussion of Medicare $$$ impacts due to their "income" increase of the Roth conversions.

@Krunch2020 Ай бұрын

About $2500 per year for a couple.

@tedlaurvik3765 Ай бұрын

I would do one conversion at age 62 then carefully determine when and how large a conversion you want to make to not cost you too much when you begin Medicare. Medicare uses your income amount two years before you begin to establish your Part B monthly bill. Pay attention to the various income limits for Medicare costs.

@jeanettebonf631 9 ай бұрын

Thank you

@dtovar2 9 ай бұрын

Excellent presentation. Thank you.

@HildaCV 9 ай бұрын

Excellent!!

@Robert-wb9tx 6 ай бұрын

Regarding whether the couple should be contributing to Roth Ira’s, I’ve found that for fed taxes it’s a wash with doing Roth conversions. On Illinois state income taxes, however, Roth conversions are considered retirement income and are not taxed. So what I did was contribute to a traditional 401k which reduces your taxable income for both fed and state taxes and then do a Roth conversion for a portion of my IRA, thus avoiding paying taxes on that amt for state taxes.

@gigemgreg 5 ай бұрын

Too much commentary before discussing scenarios. But overall informative.

@rickstephan6707 10 ай бұрын

Similar situation for me except I'm 60, single, have more tax deferred but 0 brokerage. I have already swallowed the bitter Roth conversion pill buy completing one, and I plan to continue for a decade. The frustrating part is that I have access to both Right Capitol and NewRetirement and they provide different recommendations (22% vs. 24%). Which software is a guy supposed to believe???

@sporter555 5 ай бұрын

Be careful with New Retirement. It recommended early conversions of $1.000.000 in a single year which guaranteed I would pay out in the maximum bracket!?!?!

@rickstephan6707 5 ай бұрын

@@sporter555 Agreed. NR's Roth Conversion Explorer is relatively new and I don't fully trust it (which is why I have used several others for a second opinion).