Should I do Roth Conversions with $2,000,000 in Retirement Savings at Age 62?
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- čas přidán 7. 08. 2024
- So you’ve saved up around $2 million and you plan to retire in a few years. As you think through tax strategies to get the most out of that money, the option to do a Roth conversion will often be discussed.
Should you be doing the Roth conversion now while you’re still working? Is it better to do the Roth conversion after you’ve retired? Or should you avoid the Roth conversion altogether?
Today we’re going to walk you through a sample case of a couple who has saved $2 million and plans to retire in three years. We’ll take you through the process of deciding whether a Roth conversion makes sense for them. Plus, we’ll share three additional strategies that they could utilize to potentially reduce their taxes and tell you what this means for their Social Security benefits as well.
Here’s some of what we discuss in this episode:
0:00 - Intro
4:30 - Retirement goals
8:53 - Income plan
12:31 - Tax projections
17:04 - Roth conversion decision
24:42 - Other ways to save on taxes
27:42 - Social Security
#retirementplanning #rothconversions #taxplanning
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Thanks for sharing. Very clearly explained and helpful in applying to my own situation.
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.
Great Video!
My question is how much are they converting each year in your example ?
Great video and info
Fantastic video! Confirmed many of the plans we are implementing but we will probably do a few tweaks. Thank you!
Excellent!!
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.
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.
Thank you
Excellent presentation. Thank you.
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.
@gregstowe4595, Please consider how the conversions could impact your Medicare Part B/Part D payments once you begin Medicare.
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
Well done!
Too much commentary before discussing scenarios. But overall informative.
No discussion of Medicare $$$ impacts due to their "income" increase of the Roth conversions.
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.
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???
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!?!?!
@@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).
gotta try and keep these to around 20 minutes...
Fantastic video! Confirmed many of the plans we are implementing but we will probably do a few tweaks. Thank you!