Another major reason for Roth Conversions in 2020 was you received a phenomenal discounted rate by converting at the lowest level of the market and therefore paying the lowest tax possible only to then have phenomenal growth tax free. I always keep my option open to do mega conversions during recessions.
Why do so many 'financial planners' talk as though their clients know nothing? Why do they talk 'at' people instead of 'to' people. Most of us are capable of learning and THEN, if you need advice, consider a consultation with a financial planner. Paying anyone a percent of my portfolio value is obscene to me. Would you pay your tax preparer a percentage of your AGI for preparing your tax return? Of course not! So why pay financial planners (and real estate agents, for that matter) a percent of a value? Nonsense!
This is an excellent, sensical discussion. Thanks. I am over 60 and somewhat financially astute. Wishing, in hindsight, I had done Roth conversions all along (oh well). Over past 6+ years, we've been doing $20K~$40K/year, well under our 24% bracket ceiling, but still creating the necessity to find some extra cash during qtrly estd payments and during filing. It's a balance, yes? . Another BIG benefit of Roth's is that unlike most retirement vehicles, the amount contributed (NOT the interest, dividends or cap gains) can be withdrawn early with no tax penalty. Un/fortunately, I took out ~$10K in 2009~2010 during a tough time. Since then, we've been fortunate and have gone from ~$40K around 2010 to over $270K today. May/will probably continue contributions/conversions as we can afford, until we take SS (when I am 70 and wife is 63). As described by many, Roth IRA distn's pair up magically with SS & Medicare.
IRS Publication 590-B page 32 has a flowchart showing that once you reach 59 1/2 and started a (as in ANY) Roth 5 calendar years ago, then all of the money is qualified for tax-free withdrawals.
Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals
I think it's not always about fear, Sometimes realistic factors discourage people from reaching their goals in life. For instance, I've tried investing in the stock market several times but always got discouraged by fluctuations of stock values..
I have seen loads of news of *TERESA JENSEN WHITE* on the internet, she must really be that good for she to be talked about in such a way. Is she on UA-cam? please how do I reach her
*TERESA JENSEN WHITE* is one of the best trader I have ever worked with in the past few years, she knows how best to deal with whatever market situation
I just looked up this person out of curiosity, and surprisingly she seems proficient. I thought this was just some overrated BS, I appreciate this big big
IRMA is also a factor 2 year look back on Medicare cost can be affected by all earned income which Roth conversion will or can affect higher Medicare premiums
I'm glad you mentioned how much things shift with the death of one partner. Most informational financial channels shy away from that but the facts are that you have so much more wiggle room early in the game. Taxes on SSI, IRMAA kicking in, RMD's, suddenly being a single taxpayer all play into your plan.
@annamartino5681 Oops! Great catch! We have updated the description with the links and you can find them here as well. We recently made updates to some of descriptions and missed those on this one! Videos with Ed Slott: ua-cam.com/video/En3ZfP70PYA/v-deo.html ua-cam.com/video/ssZNa1cEpu0/v-deo.htmlsi=zLBlHsjLt58JYNSo ua-cam.com/video/5Lb0aeR-VH4/v-deo.htmlsi=U-ICAN0GfCxWA3PH ua-cam.com/video/HHPMo9l0yeg/v-deo.htmlsi=t0oo_GaHIk1hwoqm Videos with JoAnn Huber: ua-cam.com/video/5Lb0aeR-VH4/v-deo.htmlsi=U-ICAN0GfCxWA3PH ua-cam.com/video/T7QebIbugcM/v-deo.htmlsi=xmVIzYbKN9lqteST ua-cam.com/video/us2DJBm-kHo/v-deo.htmlsi=lVjDO0aQ56oXY-6- ua-cam.com/video/fBHPWuVYS_k/v-deo.htmlsi=Rmmf9wxzNSFsZ2Xp ua-cam.com/video/MtYkOz0nlHE/v-deo.htmlsi=aX6QWWE1aiRwBvb7 ua-cam.com/video/T7QebIbugcM/v-deo.htmlsi=xCQfv5CCeSi_618d
My former company gave matching for my 401k in the tax deferred buckets. I was contributing to the ROTH portion for all my contributions and getting the match in the tax deferred bucket. Now I am doing conversions to reduce the future RMDs. My situation did not make sense to contribute only to tax deferred bucket.
@10:00 You have to be careful about just minimizing the taxes you pay. You have to optimize your post tax spendable funds. For instance, you can do a Roth conversion but if the tax rate either option is the same, you'll pay less taxes, but you did not gain any utility in your resources.
All these shows always act like once you retire then they throw in the caveat about the years prior to taking Social Security is the time to do Roth conversions. These folks are delaying taking Social Security and living off of what they have in their accounts so there is a runway to do Roth conversions. What about those that have worked up until the age of 70 where they have to take their Social Security and they do still have a sizable portion in pretax 401ks and Traditional IRAs? Then you have IRMAAS to worry about, as well when contemplating Roth conversions. Which say it’s too late to do any meaningful Roth conversions?
So the Roth 401k I understand what you mean if you're high tax bracket but most of us aren't. Between my wife and I we teeter between the 22 and 12% brackets. We make 130,000 a year My wife just turned 60 and I am 53. My plan is for her to max out her Roth 401k and I will max out my deferred so that will drop us down into the 12% bracket. You plan to do this for the next two years you may also do Roth IRAs too if we stay in that 12% bracket., we also plan on her retiring at 64 and not take an income for 2 years so that we can convert as much as her already deferred to Roths.
$130k - $29,200 (standard federal deduction) = $100,800 so only $6,500 of income is at 22% FTB. $8,000 Roth IRA each and whatever combination Roth/traditional 401(k) $30,500 each is reasonable. Keep some traditional money.
So when I started paying in to my retirement fund 23 years ago, everyone was telling me how great it is that it was pre-tax. Now I find out that it wasn't. I plan on retiring in a few years, I don't know what to do...
There was no mention that if your chose the Roth 401K, the growth / earnings is also Tax Free for Life! That is a huge benefit of choosing the Roth option!
I hear it is best to pay the tax on the conversion with taxable accounts (checking/savings). Could that not be well from an existing Roth at post retirement? If not, what if anticipate the tax from Roth to taxable before the year of conversion? Would that satisfy it or is there a look back of where the source of funds from?
There is no difference between paying taxes from a Roth withdrawal or out of the regular IRA - at the end of the transactions you’re in the same place, less net movement into the Roth than if you can pay the taxes from non-tax advantaged funds. Paying the taxes from outside effectively moves more money into the advantaged accounts, the same way maxing out a Roth 401k is effectively a higher rate of savings compared to maxing out a before tax 401k
I have a Roth and love the Roth IRA but her argument @ 2:11 is not going to satisfy the anti-govt skeptics. They will say, 'Yeah, the govt will take the tax now and again in the future!"
One issue....which probably wont effect many, but... IF you do start or have a ROTH in a TSP (Federal TSP) be sure to put at least $1.000.00 in it. Reason being...the minimum withdraw, when you're ready to withdraw just the ROTH, is $1,000.00
Also, the conversion is NOT included in the MAGI limits for your annual Roth contribution (MAGI rules differ depending on what tax law is involved, conversions are included for pretty much everything else)
You can still do conversions, but only on top of the MRD. That cuts into how much you can move efficiently, but you can still convert up to your bracket max or next IRMMA level without any real cost and it might make sense to go beyond. You need to run the numbers and see.
I’ve taken a somewhat different approach…. My goal is to convert my IRA down to $250K or less by the end of 2025, before the current tax rates expire and they go up. RMDs on 250K will be mostly covered by the standard deduction and keep my Soc Sec benefits in the non taxable range. I am 66 and still on a company health plan, so IRMAA is not a factor. My conversions of $225K-$250K the past two years put me in the 24% tax range. I have converted another $100K already in 2023 to take advantage of lower stock prices.(More shares converted to Roth at same conversion dollar amount). I may drop back to the 22% tax bracket now thru 2025 and have my Roth conversions completed by end of 2025. I am waiting to 70 for Soc Security.
I read elsewhere that the 10% early distribution penalty does not apply for conversions before 59.5. is this only for rollover IRAs or is that incorrect?
Hello @sbkpilot11 - A Roth conversion is a taxable event. Taxes are owed whether it is before or after 59.5. You can choose to pay the taxes owed directly to the IRS or withhold some of the conversion to pay the taxes. The 10% penalty only applies on a Roth conversion before age 59.5 if you withhold funds from the conversion to pay taxes as a result of the Roth conversion. Furthermore, the 10% penalty would only apply to the amount withheld to pay taxes. In any Roth conversion prior to 59.5, there is no 10% tax penalty if you pay the taxes owed from Roth converting out-of-pocket, directly to the IRS. Feel free to reach out to us if you have further questions at barberfinancialgroup.com.
@@AmericasWealthManagementShow Wow! This is the first time I've heard this. I guess I can now convert my Traditional IRA into a Roth, pay the taxes from my cash reserve, and not have to wait until I'm 59.5. Thanks for this valuable information.
@@paulcali08 During a conversion, Paying taxes from your other resources (savings, not another IRA) in a way is like moving some of those other resources into the Roth IRA. It depletes a taxable account and augments your Non-taxable account.
@@sbkpilot1 Who makes up these rules?? Its no wonder that people have trouble figuring this retirement stuff out. Did not know these 10% penalty details. Gosh.
There is one thing you are not addressing in your conversion discussion. Earnings! If you delay your conversion until after you retire the conversion of principal and earnings may be such that you can't complete a conversion without being in a substantially higher tax bracket.
@@cybrainx72 The larger the value of your before tax accounts in retirement the more likely you are to end up in a higher bracket. If you end up with drawing down the IRA such that your total income is the same or less than when you’re working it won’t matter much if those draws are at or above your RMD. But if your account grows beyond that level, either through favorable returns or you just keep working longer and don’t need it, that’s when the RMDs start to push you up the tax brackets. So if you’re very growth minded with your investments Roths are more attractive than before tax accounts. Or if you’re planning to just let the money grow and live off some combination of pension and SSI, same thing.
@@cybrainx72another way to think about it is that you can only convert a certain amount of money each year efficiently. The fewer years you have to work with the less you can move, but also the more you have, the more likely it will be that you don’t have enough years to get the moves done without being forced to do it in higher brackets or getting pushed up the Medicare surcharge ladder. So getting started before retirement both gives you more years to maneuver in, and the growth on what you are converting isn’t added into the amount remaining to move. Hope this helps.
@@PaulWestkaemper but you benefit from low tax brackets for the initial portion income which is sourced from conversion , making your effective tax rates low on the converted amount as compare marginal rates you would pay.
@@PaulWestkaemper Take example of some one who retires at 65 and eligible for Medicare. They 9 years of conversions left.with 3 Mill tax deferred portfolio. When filing jointly Lets assume you convert 300K each year. How much would IRMMA (Part B and D) premium increase ? how much does it represent of your taxable income, < 3% ? Add that to the Effective income tax rate. Even then it might come out on top on Marginal tax rate. I guess biggest risk with delaying conversion is 1. Increased tax bracket though inflation will take care lowest dollar being protected from taxes 2. Changr status to married filing single due to divorce or death.
8:20 "All my money in Roth IRA I'd do it." Right after she advocates "moderation in all things." His ALL ROTH approach is tax inefficient as he loses out on standard federal deduction and at his highest salary he be paying at his highest federal tax rate when he'd most likely be better off contributing to traditional 401(k).
Retiring in 20 years? Due to inflation, you may need upwards of $2.6 million to maintain your existing lifestyle, with the ongoing effects of high inflation, lower forecasted stock market returns, and stagnant wages, achieving a secure early retirement could be more challenging than ever before.
An obvious way to lnvest for a recession is to buy shares in businesses that are likely to experience steady demand even in a downturn. Typically, those are consumer staples, utilities, and healthcare companies, but off course such decisions cannot be made by an average Joe, a financial advisr is important in making this decisions
Even if you’re not skilled, it is still possible to hire one. I was a project manager and my personal portfolio of approximately $850k 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.
My Financial adviser is ‘’'Catherine Morrison Evans ’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
I didn’t hear any points that made conversion worthwhile. Not when inflation is 32% and most retirees are forced to take more, putting them into higher tax brackets in retirement, just to survive. The only thing that I recognized as a benefit is the notion that taxes will potentially go up in the future. But bottom line, converting when the inflation tax is 32%, and to survive you’re forced into a higher tax brackets to fund more governmental criminality, is nonsensical. You’re damned if you do, damn if you don’t. Meanwhile, our ancestors roll in their graves listening to the nonsense about taxation of this kind anyways. We’ve disgraced our ancestors’ sacred honor by allowing America to return to taxation (without representation).
It is not just about taxes. Roths are great estate planning accounts, pass on to you heirs with no tax liability for them. I do agree Government is way too big.
the smart thing to do is move enough of your traditional ira into a roth to make your rmd not move you into a higher bracket but be careful that your conversions dont move you into either a higher bracket or changing your medicare costs...the best time is from 66 to 70 when you wont be earning that much since your waiting for 70 to take social security....
I am turning 50 and hope to retire at 55 to collect a pension. Would the best time to do a Roth conversion be from 55 to 61 before I am eligible to start collecting SS, or should I just take the tax hit and do the Roth conversion now when I'm almost 50?
Even if you're just starting at zero (Which someone at 45 should Not be!) Its only $3,200/ month for 20 years to accumulate 2.5 Million. Again, shame on you if you have nothing saved, though
Great insights in this video! Managing taxes in retirement is crucial. Speaking of tax strategies, have you heard about diversifying retirement savings with crypto? It's a game-changer for long-term wealth building. My Digital Money makes it easy to explore that avenue.
Another major reason for Roth Conversions in 2020 was you received a phenomenal discounted rate by converting at the lowest level of the market and therefore paying the lowest tax possible only to then have phenomenal growth tax free. I always keep my option open to do mega conversions during recessions.
Why do so many 'financial planners' talk as though their clients know nothing? Why do they talk 'at' people instead of 'to' people. Most of us are capable of learning and THEN, if you need advice, consider a consultation with a financial planner. Paying anyone a percent of my portfolio value is obscene to me. Would you pay your tax preparer a percentage of your AGI for preparing your tax return? Of course not! So why pay financial planners (and real estate agents, for that matter) a percent of a value? Nonsense!
This is an excellent, sensical discussion. Thanks.
I am over 60 and somewhat financially astute. Wishing, in hindsight, I had done Roth conversions all along (oh well). Over past 6+ years, we've been doing $20K~$40K/year, well under our 24% bracket ceiling, but still creating the necessity to find some extra cash during qtrly estd payments and during filing. It's a balance, yes?
.
Another BIG benefit of Roth's is that unlike most retirement vehicles, the amount contributed (NOT the interest, dividends or cap gains) can be withdrawn early with no tax penalty.
Un/fortunately, I took out ~$10K in 2009~2010 during a tough time.
Since then, we've been fortunate and have gone from ~$40K around 2010 to over $270K today. May/will probably continue contributions/conversions as we can afford, until we take SS (when I am 70 and wife is 63). As described by many, Roth IRA distn's pair up magically with SS & Medicare.
You can start Roth conversions from traditional IRA starting at age 59 1/2. I wish we could do it sooner!
@@normt430 You can start conversions from traditional IRA to Roth IRA at any age.
No mention of IRMAA medicare impact from Roth conversions. That is one of the drawbacks of conversions.
Those will only last two years as medicare does a two year lookback. If you get them done before age 63 there is no IRMAA.
Thank you very much for this video! Seems like a common question but could not find anyone else talking about this decision.
IRS Publication 590-B page 32 has a flowchart showing that once you reach 59 1/2 and started a (as in ANY) Roth 5 calendar years ago, then all of the money is qualified for tax-free withdrawals.
Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals
I think it's not always about fear, Sometimes realistic factors discourage people from reaching their goals in life. For instance, I've tried investing in the stock market several times but always got discouraged by fluctuations of stock values..
I have seen loads of news of *TERESA JENSEN WHITE* on the internet, she must really be that good for she to be talked about in such a way. Is she on UA-cam? please how do I reach her
I'm surprised you know her too. I've been making a lot of profits investing with her for a few months now
*TERESA JENSEN WHITE* is one of the best trader I have ever worked with in the past few years, she knows how best to deal with whatever market situation
I just looked up this person out of curiosity, and surprisingly she seems proficient. I thought this was just some overrated BS, I appreciate this big big
IRMA is also a factor 2 year look back on Medicare cost can be affected by all earned income which Roth conversion will or can affect higher Medicare premiums
I'm glad you mentioned how much things shift with the death of one partner. Most informational financial channels shy away from that but the facts are that you have so much more wiggle room early in the game. Taxes on SSI, IRMAA kicking in, RMD's, suddenly being a single taxpayer all play into your plan.
No rmd on roth
Thank you! Could you please publish the links to the shows you were referencing in this video?
@annamartino5681 Oops! Great catch! We have updated the description with the links and you can find them here as well. We recently made updates to some of descriptions and missed those on this one!
Videos with Ed Slott:
ua-cam.com/video/En3ZfP70PYA/v-deo.html
ua-cam.com/video/ssZNa1cEpu0/v-deo.htmlsi=zLBlHsjLt58JYNSo
ua-cam.com/video/5Lb0aeR-VH4/v-deo.htmlsi=U-ICAN0GfCxWA3PH
ua-cam.com/video/HHPMo9l0yeg/v-deo.htmlsi=t0oo_GaHIk1hwoqm
Videos with JoAnn Huber:
ua-cam.com/video/5Lb0aeR-VH4/v-deo.htmlsi=U-ICAN0GfCxWA3PH
ua-cam.com/video/T7QebIbugcM/v-deo.htmlsi=xmVIzYbKN9lqteST
ua-cam.com/video/us2DJBm-kHo/v-deo.htmlsi=lVjDO0aQ56oXY-6-
ua-cam.com/video/fBHPWuVYS_k/v-deo.htmlsi=Rmmf9wxzNSFsZ2Xp
ua-cam.com/video/MtYkOz0nlHE/v-deo.htmlsi=aX6QWWE1aiRwBvb7
ua-cam.com/video/T7QebIbugcM/v-deo.htmlsi=xCQfv5CCeSi_618d
My former company gave matching for my 401k in the tax deferred buckets. I was contributing to the ROTH portion for all my contributions and getting the match in the tax deferred bucket. Now I am doing conversions to reduce the future RMDs. My situation did not make sense to contribute only to tax deferred bucket.
liked this one discussing pre-post retirement
Wish I’d known time to start post retirement. I wanted to skip the before.
I have got a Long Term Capital Gains loss of $3000 - Does the Roth Conversion affect this? Or would it go on the seperate form? Thanks
Short answer: No. Withdrawals for Roth conversions are considered "income" that you have to pay tax for.
@10:00 You have to be careful about just minimizing the taxes you pay. You have to optimize your post tax spendable funds. For instance, you can do a Roth conversion but if the tax rate either option is the same, you'll pay less taxes, but you did not gain any utility in your resources.
False assumption-provided your assets grow while inside the Roth account.
All these shows always act like once you retire then they throw in the caveat about the years prior to taking Social Security is the time to do Roth conversions. These folks are delaying taking Social Security and living off of what they have in their accounts so there is a runway to do Roth conversions. What about those that have worked up until the age of 70 where they have to take their Social Security and they do still have a sizable portion in pretax 401ks and Traditional IRAs? Then you have IRMAAS to worry about, as well when contemplating Roth conversions. Which say it’s too late to do any meaningful Roth conversions?
So the Roth 401k I understand what you mean if you're high tax bracket but most of us aren't. Between my wife and I we teeter between the 22 and 12% brackets. We make 130,000 a year My wife just turned 60 and I am 53. My plan is for her to max out her Roth 401k and I will max out my deferred so that will drop us down into the 12% bracket. You plan to do this for the next two years you may also do Roth IRAs too if we stay in that 12% bracket., we also plan on her retiring at 64 and not take an income for 2 years so that we can convert as much as her already deferred to Roths.
$130k - $29,200 (standard federal deduction) = $100,800 so only $6,500 of income is at 22% FTB. $8,000 Roth IRA each and whatever combination Roth/traditional 401(k) $30,500 each is reasonable. Keep some traditional money.
So when I started paying in to my retirement fund 23 years ago, everyone was telling me how great it is that it was pre-tax. Now I find out that it wasn't. I plan on retiring in a few years, I don't know what to do...
There was no mention that if your chose the Roth 401K, the growth / earnings is also Tax Free for Life! That is a huge benefit of choosing the Roth option!
I hear it is best to pay the tax on the conversion with taxable accounts (checking/savings). Could that not be well from an existing Roth at post retirement? If not, what if anticipate the tax from Roth to taxable before the year of conversion? Would that satisfy it or is there a look back of where the source of funds from?
There is no difference between paying taxes from a Roth withdrawal or out of the regular IRA - at the end of the transactions you’re in the same place, less net movement into the Roth than if you can pay the taxes from non-tax advantaged funds. Paying the taxes from outside effectively moves more money into the advantaged accounts, the same way maxing out a Roth 401k is effectively a higher rate of savings compared to maxing out a before tax 401k
I have a Roth and love the Roth IRA but her argument @ 2:11 is not going to satisfy the anti-govt skeptics. They will say, 'Yeah, the govt will take the tax now and again in the future!"
Learning a lot if you're in your mid 50s and not planning for taxes you could screwed. Adult choices need to made 😊
One issue....which probably wont effect many, but... IF you do start or have a ROTH in a TSP (Federal TSP) be sure to put at least $1.000.00 in it.
Reason being...the minimum withdraw, when you're ready to withdraw just the ROTH, is $1,000.00
Question: Can I do partial roth conversion on 401k(rollover IRA) AND still contribute to my IRA ROTH? (already had this IRA ROTH) Thank you.
Yes, you can 😁
Also, the conversion is NOT included in the MAGI limits for your annual Roth contribution (MAGI rules differ depending on what tax law is involved, conversions are included for pretty much everything else)
is there anything that can be done if i am already 75 and getting RMD and did not plan for it prior to retirement.
Why do they not answer your question?
You can do charitable contributions to alleviate taxes from your RMD. Look it up.
You can still do conversions, but only on top of the MRD. That cuts into how much you can move efficiently, but you can still convert up to your bracket max or next IRMMA level without any real cost and it might make sense to go beyond. You need to run the numbers and see.
I’ve taken a somewhat different approach…. My goal is to convert my IRA down to $250K or less by the end of 2025, before the current tax rates expire and they go up. RMDs on 250K will be mostly covered by the standard deduction and keep my Soc Sec benefits in the non taxable range. I am 66 and still on a company health plan, so IRMAA is not a factor. My conversions of $225K-$250K the past two years put me in the 24% tax range. I have converted another $100K already in 2023 to take advantage of lower stock prices.(More shares converted to Roth at same conversion dollar amount). I may drop back to the 22% tax bracket now thru 2025 and have my Roth conversions completed by end of 2025. I am waiting to 70 for Soc Security.
Excellent point on the reduction to $250k, et al. Thank you for the thinking point!
I wish I could convert when the market was down in recent years. Might have to wait until next decade before the next market dip.
I read elsewhere that the 10% early distribution penalty does not apply for conversions before 59.5. is this only for rollover IRAs or is that incorrect?
Hello @sbkpilot11 - A Roth conversion is a taxable event. Taxes are owed whether it is before or after 59.5. You can choose to pay the taxes owed directly to the IRS or withhold some of the conversion to pay the taxes. The 10% penalty only applies on a Roth conversion before age 59.5 if you withhold funds from the conversion to pay taxes as a result of the Roth conversion. Furthermore, the 10% penalty would only apply to the amount withheld to pay taxes. In any Roth conversion prior to 59.5, there is no 10% tax penalty if you pay the taxes owed from Roth converting out-of-pocket, directly to the IRS. Feel free to reach out to us if you have further questions at barberfinancialgroup.com.
@@AmericasWealthManagementShow lol, can the IRS make it just a bit more complicated? because frankly it isn't complicated enough really 🤣🤣
@@AmericasWealthManagementShow Wow! This is the first time I've heard this. I guess I can now convert my Traditional IRA into a Roth, pay the taxes from my cash reserve, and not have to wait until I'm 59.5. Thanks for this valuable information.
@@paulcali08 During a conversion, Paying taxes from your other resources (savings, not another IRA) in a way is like moving some of those other resources into the Roth IRA. It depletes a taxable account and augments your Non-taxable account.
@@sbkpilot1 Who makes up these rules?? Its no wonder that people have trouble figuring this retirement stuff out. Did not know these 10% penalty details. Gosh.
How does a Roth affect medicare?
There is one thing you are not addressing in your conversion discussion. Earnings! If you delay your conversion until after you retire the conversion of principal and earnings may be such that you can't complete a conversion without being in a substantially higher tax bracket.
I don't get this ? Can you elaborate ?
@@cybrainx72 The larger the value of your before tax accounts in retirement the more likely you are to end up in a higher bracket. If you end up with drawing down the IRA such that your total income is the same or less than when you’re working it won’t matter much if those draws are at or above your RMD. But if your account grows beyond that level, either through favorable returns or you just keep working longer and don’t need it, that’s when the RMDs start to push you up the tax brackets.
So if you’re very growth minded with your investments Roths are more attractive than before tax accounts. Or if you’re planning to just let the money grow and live off some combination of pension and SSI, same thing.
@@cybrainx72another way to think about it is that you can only convert a certain amount of money each year efficiently. The fewer years you have to work with the less you can move, but also the more you have, the more likely it will be that you don’t have enough years to get the moves done without being forced to do it in higher brackets or getting pushed up the Medicare surcharge ladder. So getting started before retirement both gives you more years to maneuver in, and the growth on what you are converting isn’t added into the amount remaining to move. Hope this helps.
@@PaulWestkaemper but you benefit from low tax brackets for the initial portion income which is sourced from conversion , making your effective tax rates low on the converted amount as compare marginal rates you would pay.
@@PaulWestkaemper Take example of some one who retires at 65 and eligible for Medicare. They 9 years of conversions left.with 3 Mill tax deferred portfolio. When filing jointly Lets assume you convert 300K each year. How much would IRMMA (Part B and D) premium increase ? how much does it represent of your taxable income, < 3% ? Add that to the Effective income tax rate. Even then it might come out on top on Marginal tax rate. I guess biggest risk with delaying conversion is 1. Increased tax bracket though inflation will take care lowest dollar being protected from taxes 2. Changr status to married filing single due to divorce or death.
🎉
8:20 "All my money in Roth IRA I'd do it." Right after she advocates "moderation in all things." His ALL ROTH approach is tax inefficient as he loses out on standard federal deduction and at his highest salary he be paying at his highest federal tax rate when he'd most likely be better off contributing to traditional 401(k).
Retiring in 20 years? Due to inflation, you may need upwards of $2.6 million to maintain your existing lifestyle, with the ongoing effects of high inflation, lower forecasted stock market returns, and stagnant wages, achieving a secure early retirement could be more challenging than ever before.
An obvious way to lnvest for a recession is to buy shares in businesses that are likely to experience steady demand even in a downturn. Typically, those are consumer staples, utilities, and healthcare companies, but off course such decisions cannot be made by an average Joe, a financial advisr is important in making this decisions
Even if you’re not skilled, it is still possible to hire one. I was a project manager and my personal portfolio of approximately $850k 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.
That's fascinating. How can I contact your Asset-coach as my portfolio is dwindling?
My Financial adviser is ‘’'Catherine Morrison Evans ’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
I didn’t hear any points that made conversion worthwhile. Not when inflation is 32% and most retirees are forced to take more, putting them into higher tax brackets in retirement, just to survive. The only thing that I recognized as a benefit is the notion that taxes will potentially go up in the future. But bottom line, converting when the inflation tax is 32%, and to survive you’re forced into a higher tax brackets to fund more governmental criminality, is nonsensical. You’re damned if you do, damn if you don’t. Meanwhile, our ancestors roll in their graves listening to the nonsense about taxation of this kind anyways. We’ve disgraced our ancestors’ sacred honor by allowing America to return to taxation (without representation).
You have to do your long term tax planning and make the best decision you can.
It is not just about taxes. Roths are great estate planning accounts, pass on to you heirs with no tax liability for them. I do agree Government is way too big.
your 40K example is not totally correct, because it grows and we have to pay taxes on more than 40K, not just 40K after retirement
Can I roll my 401k into a roth?
If you have LEFT the job that you established the 401k with, yes.
Just remember you will have to pay income tax on the portion rolled over.
the smart thing to do is move enough of your traditional ira into a roth to make your rmd not move you into a higher bracket but be careful that your conversions dont move you into either a higher bracket or changing your medicare costs...the best time is from 66 to 70 when you wont be earning that much since your waiting for 70 to take social security....
By far most Americans take ss benefits at age 62. By far.
I am turning 50 and hope to retire at 55 to collect a pension. Would the best time to do a Roth conversion be from 55 to 61 before I am eligible to start collecting SS, or should I just take the tax hit and do the Roth conversion now when I'm almost 50?
@@longgone9738 - I hope that is not true. Those starting at 62 are giving away a ton!
They are wrong, when single, its just half of being married tax liable, and if you have kids, one can claim head of household the higher earner.
Even if you're just starting at zero (Which someone at 45 should Not be!)
Its only $3,200/ month for 20 years to accumulate 2.5 Million.
Again, shame on you if you have nothing saved, though
Roth conversion and be paid with RMD as the last resort
Great insights in this video! Managing taxes in retirement is crucial. Speaking of tax strategies, have you heard about diversifying retirement savings with crypto? It's a game-changer for long-term wealth building. My Digital Money makes it easy to explore that avenue.
Wow. Mic'd the talent and they still sound like they're in a bathroom.
Boring and not particularly informative. Wasted my time.
When did Michael Keaton became a financial adviser?