Here’s How You Can Tell If a Roth Conversion Is Right For You
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- čas přidán 20. 07. 2024
- One of the best things you can do for your portfolio is to implement the right tax strategy. Each situation is unique and requires a personalized approach.
Using a listener’s question, James explains one specific example to show when and how to implement the right strategy.
Questions Answered:
Why should or shouldn't you do Roth conversions?
What should you be mindful of when doing Roth conversions?
Learn the tips & strategies to get the most out of life with your money.
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⏱Timestamps:⏱
0:00 Introduction
0:53 Listener question
4:03 Two core things to focus on
5:56 Should we do a Roth conversion?
7:13 Taxable income
9:16 Lower tax bracket
11:24 Taking a basic look
14:21 Gray area
16:40 Control the balance
19:31 Big picture plan
20:41 Outro
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Great production, as always, James. It would have helped me if I could have seen the numbers on the screen to follow you. I realize this was set up as a podcast and then shared on CZcams. Thank you for that. I'm just starting my research on Roth Conversions, so I'll watch everything else you have on this topic.
Well done. Thank you for ALL the various videos that you have uploaded. I have listened to about 10 and have learned a lot.
Thanks for great content as always.
By doing a Roth conversion today she will pay the 24% marginal to avoid a 13 to 16% effective tax in the future.(single filer)
Asset location should be the concern .
She should consider a 3 bucket strategy.
The 650k in the pre tax account will be over 700k by the time she retires and this should all be in safe and semi safe assets -bucket 1 and 2.
She can know invest the Roth and brokerage accounts more aggressively in bucket 3.
The way I see it this will control the tax hit due to RMDs and mitigate sequence risk for the next 8 to 10 years.
All while the Roth and brokerage account have more time to grow.
I really enjoy you podcast on youtube super informative! Thank you! How does one ask as question for your podcast?
So, to summarize, it depends. I kind of figured that going in and it's interesting that in this case study the answer was indeterminant. For my portfolio, it is basically all pre-tax and I suspect this will be the case for many people. The models I've run clearly show a huge tax liability lurking out at 75 when my RMDs kick in. The trick then is to try and determine how best to trade off tax burden now for tax burden later. I have modeled a few different Roth conversion scenarios and have gotten some improvements, but it's a tricky balance. I think a session about Roth conversions for people with nearly all their retirement assets in pre-tax accounts would help the greatest audience.
Feasibility of Roth conversions are a KISS issue. Just stay in your lane. Whatever tax bracket you have stayed under by doing pre-tax contributions. Just stay in that bracket. Perfect utilization my friend.
@@jacqueandrew1033 Where.
Thank you James. Great information. Question for you...is it possible that a third reason to do Roth conversions is for the benefit of your beneficiaries? In my case I do not plan to use our Roth accounts but pass them on to our daughters. In essence I am taking the tax hit during my lower income years rather than pass on more in my tax-deferred account which they will need to pay taxes on...possibly at higher rates during what could be their higher earning years.
I’m 71 and doing Roth conversions to the top of the 12% tax bracket. My daughter will be paying at least 22% when she inherits. why not do it now?
@@donofd9626My thought exactly.
Hello James, solid information-food for retirement. Question, off topic, seeking confirmation for a detailed Retirement Financial Plan - $3,500 would that be a reasonable rate.
Thank you! 😊
You're welcome 😊
What would be her tax bracket and how much of SS is taxed that’s the question to answer
Really realistic James. I’d be worried about retirement too oh wait she has over 2 million dollars…