The Retirement Savings Time Bomb Ticks LOUDER with Ed Slott

[@CliveBirse]

Small taxes can affect investment decisions such as whether to choose tax-free municipal bonds over taxable bonds or do a Roth IRA conversion. I’ve been sitting on over $745K equity from a home sale and I want to invest on the stock market, how do I achieve this without being taxed twice?

[@mariaguerrero08]

There’s more benefit to holding fixed-income assets in tax-deferred retirement accounts as opposed to taxable accounts. If you're not who understands strategies to invest in the market, seek a Financial advisor to guide you.

[@ThomasChai05]

Exactly my solution too, even though I'm not retired. As a contractor with limited time to analyze investments, I've relied on a fiduciary for the past seven years to manage my portfolio. This strategy has helped me navigate market fluctuations effectively and also increased my porfolio by up to 300%. You might consider a similar approach.

[@mikegarvey17]

@@ThomasChai05This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?

[@ThomasChai05]

Yes indeed.... *Izella Annette Anderson* has always been on the top of my list..She is regarded as a genius in her area and well knowledgeable about financial markets. I highly recommend you look her up if you want excellent collaboration.

[@JulietKellyy]

I copied her full name and pasted it into my browser; her website popped up immediately and her qualifications are excellent; thanks for sharing.

[@HodgeChris]

I think the retirement crisis will get even worse. A lot of people can’t save because of low paying jobs, inflation, and insane rental rates. And now that home ownership is out of reach for middle class Americans, they won’t have a house to retire with either.

[@NicholasHarmon-ow3jl]

Things are a bit strange right now. Inflation is making the dollar weaker for buying things like basic needs, but it's getting stronger against other stuff. So, stuff like stocks, houses and precious metals aren't doing so great because folks are putting their money into banks for safety but I'm worried about my retirement savings losing value fast.

[@brucemichelle5689.]

Even if you’re not skilled, it is still possible to hire one. I was a project manager and my personal portfolio of approximately $400k of my retirement pension took a big hit in April due to the crash. I quickly got in touch with a financial-planner that devised a defensive strategy to protect my funds and make profit from my portfolio this red season. I’ve made over $250k since then.

[@Justinmeyer1000]

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

[@brucemichelle5689.]

‘’Aileen Gertrude Tippy” just check her out. It's possible to hire a skilled financial planner especially if you're not one yourself. I hired one after my retirement pension took a hit in April due to the crash.

[@Justinmeyer1000]

I appreciate this tip. It was easy to find your coach's webpage by looking up her name online, She seems proficient considering her resume.

[@keithmachado-pp6fv]

I have been critical of advisors and others on you tube, including Ed, who take a strategy that would be good for a minority (for example Roth conversions which require a seven figure IRA for RMDs to get above the standard deduction) and make blanket statements saying they are good for everyone. With that said, I just read Ed’s new book cover to cover in one sitting. It is an excellent book and much more balanced than I expected, very logical with none of the corny catch phrases. As a knowledgeable investor I went in with low expectations and was pleasantly surprised to find a couple of real nuggets, particularly as it relates to life insurance, beneficiaries, and estate tax. Even the Roth conversion section, although basic, was well done. I highly recommend the book.

[@keithmachado-pp6fv]

First of all I respect Ed Slott and David McKnight and they do much more good than harm, but there are others that try to copy them, even stealing their catch phrases that have no clue. Many of us that were in the highest tax bracket while working could not contribute to a Roth IRA and a Roth 401k was not offered so we maxed out our pre tax 401k and maxed out our cash value life plolicy. Let me be clear. I am not against Roth conversions as they can work in specific situations, in particular to avoid the widow trap or lower your estate value to avoid federal or state estate tax or when you or your heirs will pay a higher % of tax when they otherwise withdraw the funds. Note that I said higher % of tax NOT be in a higher bracket or pay more tax. Here is a simple example. You are currently in the 22% bracket and convert $100k paying $22k of tax in today’s dollars. The remaining $78k doubles to $156k tax free by the time you otherwise would be taking RMDs. If instead you deferred and your $100k doubles to $200k and you are now in the 25% tax bracket, you would have $150k after tax so it appears the Roth wins by $6k. Except you don’t pay the entire $50k in year 1 of RMDs. It is spread out over many years and with proper planning you will pay some at 0% (standard deduction) and lower tax brackets so the average will be much less than 25% and can be much less than the 22% you would have paid to convert. Plus you pay slowly over many years in inflation adjusted dollars at a time when you have less risk of running out of money (since you are closer to death) and the money has less enjoyment value as you are slowing down. Both the standard deduction and tax brackets adjust for inflation each year so it will take much more income to get into higher brackets. Could tax rates go up in the future, of course they can. Can the stock market tank by 50%+, it could as well ala 2008 and that would make conversion a terrible choice. Might you relocate in retirement to a tax free state after paying state tax on your conversion. Bottom line is it is not one size fits all and any adviser worth their salt knows that and you have to do the math for your situation. What about protecting your heirs from taxes you say. Again it depends on their tax bracket. If you have multiple heirs you can give the one in a low bracket the deferred money and the other one the assets with step up in basis.

[@BillIggins]

You will not be in a zero tax bracket with the standard deduction unless you have zero social security once your rmds start your point falters as social security alone if you made a decent amount of money will eat up the standard deduction. Then you need to pull rmds which will be 50-75k or more if your Ira is going. I think your somewhat right but it will be very difficult if you don’t convert to stay at or near the 0-12 percent brackets

[@keithmachado-pp6fv]

Thanks for the reply. I will never be in the 12% bracket. I am currently in the 24% bracket so any conversions will be at 24% or 28% post 2025. My plan is to reallocate my investments to municipal bonds, MLPs, and life insurance cash value so SS and IRA withdrawals are my only income 12 years from now are RMDs and SS. With inflation adjustments to the standard deduction and tax brackets, my SS income will be absorbed by the standard deduction so my RmDs will be taxed at a mix of 10%, 12 or 15%, 22 or 25% and 24 or 28% but the average will be less than the 24% or 28% I will pay today to convert.

[@davidculbreth5371]

You are assuming future tax rates will be the same. They will most likely be higher.

[@keithmachado-pp6fv]

Did you read what I wrote. I included the post 2025 tax rates. If you have better information than that you must be a psychic.

[@keithmachado-pp6fv]

The growth rate on your investments are not relevant unless you invested everything in a single stock like Nvidia and it went up by 10,000% in which case the Roth wins big. Otherwise whether you gain 5% per year, 10% per year, or 15% per year will not impact the result. The reason is that when you convert, you need to pay the tax all up front either from your after tax money which would otherwise be invested or from the conversion funds which lower the beginning Roth balance. At the end of the day the only thing that matters is which choice will you or your heirs pay less % of tax on the money when withdrawn. Which one wins won’t be known for sure until 10 years after you die.

[@daisyreinacher5022]

Loved the blue book version!

[@matthewrutstein7950]

Regarding Roth conversions: how do you factor in your federal standard deduction during retirement? Wouldn’t it be wise to keep some money in the traditional IRA and not convert to Roth since you can deduct tax free up to that withdrawal limit? If so, how do you figure out how much to keep in that traditional IRA?

[@OurRetireEarlyJourney]

An IOU to the IRS 😅. Well said!

[@howdydo64]

Tax changes happen constantly... what makes you think that they will not tax Roth IRA's in the future?

[@sct4040]

Omg, I better take it out now.

[@MrCem1016]

Or even HSA’s?

[@casa87blue]

Good point....they were never supposed to tax social security either, but guess what. What if they started to tax up to 85% of Roth earnings?

[@Lik3ToSing]

Lovely point

[@pauld9653]

Ques: what is that map behind you on the wall of Bud with Mo, Kan and a few others in black? Thanks

[@chrisbauer6505]

Those states in black are the states with MWM offices to best of my knowledge.

[@sabastinenoah]

My Portland home recently sold, and I'm considering investing the proceeds in stocks. I know it's a wonderful time to buy, but is it the right moment? How much time will it take to fully heal? I am quite perplexed at this time as to how other individuals in the same market are making over $450,000 in gains in a matter of months.

[@Peterl4290]

Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert

[@larrypaul-cw9nk]

It's true that many people underestimate the importance of advisers until their own feelings burn them out. A few summers ago, following an ongoing divorce, I needed a significant push to keep my company afloat. I looked for licensed advisors and found someone with outstanding qualifications. She has contributed to my reserve increasing from $275k to $850k regardless of inflation.

[@Mrshuster]

How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?

[@Mrshuster]

I just Googled her name and her website came up right away. It looks interesting so far. I'm going to send a mail to her and let you know how it goes.Thanks for sharing truly!

[@keithmachado-pp6fv]

Less taxes over your lifetime is not the measure of success. I can show an example where you pay twice as much tax and still come out equal at age 90 if the reason for more tax is the account growth. The only variable that matters is the tax rate not the total tax dollars. When you convert all is paid at your highest current tax bracket or higher. When you defer, with proper planning, you can pay some at zero and lower brackets so the average may be lower. You have to do the math and make some assumptions.

[@PorscheSpeedster-kz6nc]

Unfortunately, Congress will look to cap Roth Accounts and put a limit on the allowable account value with forced RMD’s for accounts above a certain value like $10,000,000…. Just terrible.

[@jonscrivner9087]

This type of greed just might be the real problem. Ten million growing tax free is much more than necessary.

[@PorscheSpeedster-kz6nc]

@@jonscrivner9087 one man’s thrift is another man’s greed I guess…

[@gwarlow]

Imagine a bunch of millionaires in Congress with secure pensions paid for by the rest of us, deciding what the rest of us will end up with. Is this a part of the “American Dream” that we were never told about? 😮

[@jaynelson8304]

All this is ultimately dependent on sequence of returns. Consider If you convert $500k of a $1M IRA to Roth at a cost of $100k then suffer a market resembling 2008-2009. The S&P was down 37% which would result in a portfolio worth $567k. If you still are withdrawing a reasonable 4% of your original amount, your new withdrawal percentage is 7. You are 4-5 years into a thirty year retirement and your chance of success has radically diminished. I'm choosing to use QCD and pay extra tax in my late 80s or 90s - God willing I live that long and the portfolio doubles - and my heirs will pay some tax on money they did nothing to earn.

[@jonscrivner9087]

It sounds like worst case scenario. I was overweight stock in 08. Lesson learned. I stayed the course, made some good moves in a down market tax wise, and recovered. Retired with a more appropriate allocation with 65% tax free 35% tax deferred. Portfolio is up 35% and RDM's are money I need for cash flow. Bucket #1 is all cash paying 5.5% currently. All the rest is bucket 2 growing mostly tax free. End of story.

[@MrGoodaches]

Hmm, much of this is based upon recycled layman chat not on factual analysis by economists, statisticians, or academic researchers. But that may appeal to some people who distrust career expertise and prefer any narrative that coincides with whatever amateur opinion they’ve already become comfortable with.