Great video. Refreshing to hear you lead with distributing to spend to smooth it out and not the Roth conversion for all that so many others preach. Bottom line on conversion to Roth is you need to do the math on what % tax you will pay today vs later if you defer. Be careful as it is NOT the tax dollars paid or your tax bracket. Two examples. You convert $100k today and pay $25k tax. The $100k triples to $300k tax free. If instead you deferred and your $125k also tripled to $375k and you pay $75k tax, triple the tax to convert, you come out in the same place of $300k after tax. Example 2 you convert in the 22% tax bracket. All of that conversion is paid in that marginal rate. If you defer, even if your marginal rate is higher the effective (average) rate could be less. Even if you are in the beginning of the 28% bracket your effective rate could be less than 20%. Don’t forget the standard deduction, tax brackets and IRMAA surcharge limits all increase annually for inflation.
Nick, your videos are extremely informative and clearly presented. Appreciate your work. As a general guide, what type of client financial profile is needed for a CFP to accept engagement? I'd assume net worth has something to do with it.
A bit of hyperbole in the title! I don't think RMDs will destroy your retirement savings. If you are single, 90 years old, and have $5M, your RMD will require withdrawing $410,000. That will result in a tax bill of $120,000 plus IRMAA. A substantial amount of money but hardly enough to Destroy Your Retirement Savings
Great video. Refreshing to hear you lead with distributing to spend to smooth it out and not the Roth conversion for all that so many others preach. Bottom line on conversion to Roth is you need to do the math on what % tax you will pay today vs later if you defer. Be careful as it is NOT the tax dollars paid or your tax bracket. Two examples. You convert $100k today and pay $25k tax. The $100k triples to $300k tax free. If instead you deferred and your $125k also tripled to $375k and you pay $75k tax, triple the tax to convert, you come out in the same place of $300k after tax. Example 2 you convert in the 22% tax bracket. All of that conversion is paid in that marginal rate. If you defer, even if your marginal rate is higher the effective (average) rate could be less. Even if you are in the beginning of the 28% bracket your effective rate could be less than 20%. Don’t forget the standard deduction, tax brackets and IRMAA surcharge limits all increase annually for inflation.
Nick, your videos are extremely informative and clearly presented. Appreciate your work. As a general guide, what type of client financial profile is needed for a CFP to accept engagement? I'd assume net worth has something to do with it.
A bit of hyperbole in the title! I don't think RMDs will destroy your retirement savings. If you are single, 90 years old, and have $5M, your RMD will require withdrawing $410,000. That will result in a tax bill of $120,000 plus IRMAA. A substantial amount of money but hardly enough to Destroy Your Retirement Savings