What’s the right amount of pre-tax money to convert to Roth each year? That’s one of the big questions after deciding to convert in the first place.
This video describes a process you can go through as you pick an amount. The assumption is that you’ve already done a thorough analysis, you decided that Roth conversions make sense, and you know the main objectives for your conversion strategy. If you haven’t already done that, it’s a critical exercise, and it will influence how much (if any) you should convert.
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The first thing to do is understand how much income you have. Roth conversions will add to that income, but we need to know your starting point. Then, you’ll review things like health coverage, income tax brackets, and more.
Eventually, you’ll arrive at a number that may make sense given your objectives. Of course, it’s critical to review the strategy regularly to make sure it makes sense. Speak with your tax expert, and be sure to consider how conversions might impact your finances and your tax return. And look into paying estimated taxes to avoid underpayment penalties.
RESOURCES:
Tax Brackets: taxfoundation.org/publication...
IRMAA Levels: www.cms.gov/newsroom/fact-she...
Don’t Overdo Roth Conversions: • Don't Overdo Roth Conv...
The Logic Behind Roth: • The Logic Behind Roth ...
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CHAPTERS
00:00 Preview
01:10 How Much Income Do You Already Have?
02:03 Review IRMAA for Medicare Premiums
04:49 Federal Income Tax
07:16 Other Health Coverage Costs
07:57 Margin of Safety
Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states.
IMPORTANT:
It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.