I'm 59.5 And Working With $650,000 In My 401(k) Should I Convert To A Roth IRA

Рет қаралды 43,429

Жыл бұрын

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Would a Roth Conversion improve my tax efficiency? What happens if I run out of income before I run out of life? Will my spouse be ok? In this study, we'll take a look at being 59.5 and working with $650,000 in your 401(k). Should you convert to a Roth IRA?
0:15 Introduction
0:52 Disclaimer
1:30 Case Study
1:50 Plan for Everything
2:27 Current Situation
3:47 Roth Conversions
6:47 401(k) vs Roth IRA
12:55 Tax Brackets
14:50 Starting Distribution Tax
15:39 How Much to Convert?
16:55 Conclusion
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#incomeplanning #retirementplanning #retirementincome #retirewith650k #retirementat59.5 #workingandmarried
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Investment advisory services offered through Blue Ridge Wealth Planners, an SEC Registered Investment Advisor. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.
Blue Ridge Wealth Planners does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Actual results will fluctuate with market conditions and will vary over time.
Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
Blue Ridge Wealth Planners is an investment advisory firm, and not an accounting firm. Viewers are encouraged to consult with a tax professional to assist them with their specific tax situation. This video is for informational purposes only and should not be considered as tailored financial or tax advice. Viewers should consult with a financial services professional to assist them with their investment and financial planning questions.

Пікірлер: 43

@striperkid 4 ай бұрын

Very informative video. You earned my subscription.

@loucinci3922 4 ай бұрын

Good info. Enjoyed the video. Thanks for sharing

@blueridgewealth 4 ай бұрын

Thanks @loucinci3922! We're glad you found value in our video!

@krishna100982 Жыл бұрын

Premise Government is overspending; They will increase taxes; My Question what stops them from implementing a tax law to tax ROTH IRA after some withdrawal, after 100k every dollar taxed at 5% as an example? All accountants recommend paying minimum taxes in immediate timeframe and worry when tax law actually changes.

@blueridgewealth Жыл бұрын

The main thing that keeps them from doing that is they are elected officials who like being elected officials and if they change rules that were previously tax free that would be career suicide. Other than that, nothing keeps the government from doing anything it wants to do.

@backcountyrpilot Ай бұрын

IRS Publication 590-B page 32 is a flowchart that shows that if you are 59.5 or better and have EVER HAD A ROTH that was started 5 colander years or more ago, then all of the funds in all of your ROTHS are 100% qualified and there is no tax for withdrawal.

@liammclaughlin2881 3 ай бұрын

it doesn't make sense to convert. You have to pay taxes. If they have S/S in the amount of $3,500 per month and they need $48,000 per year then they can make up the difference from the 401K without paying ANY tax. This goes on until RMD age which would be 75. This example doesn't make3 sense.

@Vanessa-hc5gw65 8 ай бұрын

They tell us to save save save for retirement and then hit us with IRMAA!

@blueridgewealth 8 ай бұрын

That is definitely a problem we look to plan around in these types of conversations. The problem is IRMAA is the penalty of choice today, who knows what things our government will cook up for us as time passes!

@gibby9209 Жыл бұрын

Wouldn't it make sense to convert the 67,150 at 12% over each of the next few years rather than pay any tax at 22%? That would keep your effective tax rate much lower than the 15%.

@blueridgewealth Жыл бұрын

Yes, it would make total sense if we knew taxes weren’t going to increase. The current tax code in place now is set to expire after the 2025 tax year so the unknown in this equation is how much time will we have the low brackets we have today. The government could change income taxes the next year or they could extend the current code longer. Based on our growing debt, it's our opinion that taxes will likely need to increase sooner rather than later but that is one of the factors to consider in this decision for sure

@charlesbyrne71 3 ай бұрын

The main problem with pretax retirement plans is that most workers don't utilize the tax savings. So if they invested $100 dollars in a 401k every pay period and the marginal tax rate is 22% what are they doing with that $22 savings? If it's not being put in an investment, i.e. they invest $122 in 401k, added to a Roth, used to pay off mortgage, college for kids, payoff student loan, put in money market then it is being wasted on beer, cigs, clothes, food.

@haroldcoleman7497 Жыл бұрын

Why wouldn't delayed SS be on the table? Low income needs, plenty of assets. Use as much as possible of the 401k after you stop working, plus do the conversions like you are presenting.

@blueridgewealth Жыл бұрын

Harold, as I mentioned in your other comment, it definitely would be on the table. For this example we are looking at one particular scenario that doesn’t mean it is the only way to do it but mainly using Social Security filing as a way to understand where long term income amounts would be.

@gobot4455 2 ай бұрын

Jesus. The tax bill if you're not careful with that conversion woukd be dreadful. Fill out the tax bracket with the conversion if tgat's what you want to do.

@tlar1272 4 ай бұрын

At 13:13… where did you get your 2023 tax bracket?

@blueridgewealth 4 ай бұрын

The chart is 2023 tax brackets with standard deductions included. We do this because this is the way most people think about their income and it allows them to see what tax rate their top dollar of income would be at.

@dagobaker Жыл бұрын

when they say roth accounts need to b in place for 5 years before they are considered tax free... they mean the actual account needs to b opened 5 years? or the funds u move need to b in place in a roth account for 5 years (my roth has been established for more than 5 years.... looking at converting 401k in a diff account to my current roth in a diff account diff company) im 48 years old

@blueridgewealth Жыл бұрын

The funds converted under the age 59.5 have to be in place for 5 years, otherwise they would incur a 10% penalty. It applies to the funds that are converted each time. Not the age of the account itself

@michaelangelo975 9 ай бұрын

If you have an existing Roth that is funded for 5+ years and you open a new Roth, the 5 year rule does not apply to the new Roth.

@backcountyrpilot Ай бұрын

@@michaelangelo975That is not true. Form 590-B page 32 shows that if you have or at one time sterted a ROTH more than 5 calamder years ago and are 59.5 or better then ALL OF THE FUNDS IN EVERY ROTH YOU HAVE ARE QUALIFIED AND TAX FREE.

@ron9665 Жыл бұрын

As people were told originally that Social Security would not exceed 3%, is there not the same ability for the FED Gov't to lie about the tax free status on the ROTH accounts? I mean we know the SS rate is more than 6% for the employee and an equal amount for their employer (so more the 400% of what people were originally told would be the SS ceiling); PLUS people are being told that by 2035 (oddly enough the year I would retire) the amount paid out to recipients will only be 75% of what each person is entitled to. I have seen info on-line that says that the government has raided what amounts to the entire SS nest egg. At the same time the Congressional benefits have not been raided nor have they been diminished in any way. It makes it hard for me to believe in the golden promise that is ROTH (though I would like to). As I have a projected 457b & Traditional IRA value that should be about $380k and a pension that looks like it will pay out based on a value of another $480k to $600k I may have more than 100% of my current wages to live on at 65 y.o. at this amount, I do not expect the Married filing jointly rate will be much different then the current rate. I am looking to place between 5 - 30% into ROTH just to avoid RMDs and to give a small lump sum that I can determine when is the best time to withdraw (needed for a car, a vacation, an unforeseen home repair). You may want to mention how a conversion to ROTH at retirement may allow more legacy options for your nest egg. Also, I noticed the 59.5 years old and thought you might want to do one for FIRE people that are reaching their early exit with a 457b and could be 5 or so years younger.

@blueridgewealth Жыл бұрын

Ron, the truest answer is the government is able to change the rules at any time. Permanent is Washington is only as long as that party has power. Saying this I believe the government would have a hard time changing the rules for things in the past. So if you contributed to a tax free account while it was tax free I think you would be fine. Could the government do away with Roth accounts for those that don’t have them and future contributions? Sure, and I think that option would be more likely. After all these are still elected individuals.

@ancientpooplover5278 Жыл бұрын

Xxx xx 8:19 8:20

@earlwilliams5473 4 ай бұрын

If I did I would do it little by little. If my income at retirement is going to be low. I wouldn't do it. I would just put it in a rollover IRA.

@blueridgewealth 4 ай бұрын

Thanks for the comment Earl! Sounds like you have a good idea of how you want to handle things but if you're ever unsure, we'd be happy to take a look at your situation with you and see if we can help. Let us know! Schedule here: bluetube.timetap.com

@birdenlightening5855 5 ай бұрын

I rolled over my 401k fund from previous employer into my current employer. I’m under 59.5 years old. Can I convert the rolled over fund to Roth without penalty?

@blueridgewealth 4 ай бұрын

Depends on your plan and how you pay taxes on the conversion. If the plan allows and you have after tax dollars to pay the taxes then yes

@joepriestley1212 9 ай бұрын

Their social security payment is $44,000 and income requirement is $48,000, so why not just take $4000 from the 401K to keep taxes low?

@blueridgewealth 9 ай бұрын

You could do that but even taking low amounts at higher rates in the future is worse than paying taxes at a lower percentage today

@eddieBoxer 4 ай бұрын

My 401K has over $900,000 dollars I want to hit $1,000,000 million dollars.

@markfox5349 4 ай бұрын

I think you spelled principal wrong

@blueridgewealth 4 ай бұрын

Yes, thank you. We have corrected it for every video we’ve done in the past 9 months.

@johnb1571 10 ай бұрын

ah they need to do as much as they can before age 63 tax yr, so they wont get hit with IRMAA at 65 and look poor on paper 👍

@blueridgewealth 10 ай бұрын

John, that is true and then be aware of the tax impact as they move forward to avoid increases to their medicare

@767bob 5 ай бұрын

When they retire and take their SS and some from their 401K/IRA's for their retired salary of $50,000 per year they will pay very little in taxes. Even when they get to their RMD years, their taxes will not be a killer. If they had 2 million dollars in their 401k/IRA's then doing a Roth conversions will make sense but not for the example done on this video.

@blueridgewealth 4 ай бұрын

Interesting point! As you can see here, there are many factors to consider in order to answer this question specifically for anyone individually. If you’d like to schedule a phone call or zoom meeting to dig deeper into your personal information, we’d love to see how we can help. Schedule here: bluetube.timetap.com

@Longjohnsilver58 9 ай бұрын

YES! And get moving before you reach 63 and IRMAA kicks in AND the tax rates go up in 2026. There I just saved you ten minutes.

@blueridgewealth 9 ай бұрын

There’s a little more to it than that, thanks for watching

@Longjohnsilver58 9 ай бұрын

@@blueridgewealth Sorry man. I meant no disrespect. Wonderful video. I just hope that guy gets it and get moving before it’s too late.

@onlywenilaugh6589 Жыл бұрын

Remember though, most of the time, if government lowers taxes, revenues go up due to the stimulation. Republicans know th8s, democrats do not. So don't bet taxes will be higher as it's a guess at best.

@blueridgewealth 11 ай бұрын

Not enough to fix the current situation. We are at the lowest tax rates in 4 decades and we are adding to the debt at an alarming rate. Taxes must increase especially when we reach a decision point on SS in the early 2030’s

@elaineburns4074 9 ай бұрын

Taxes do not have to go up, imo. The government needs to stop all of the wasteful spending. Social security is not an entitlement as some politicians like to call it. If you have worked 35 years, you and your employer have paid into the system. Now, welfare is an entitlement that could be reduced or done away with, imo! Quit rewarding irresponsible behavior. After that first child, you should not receive more money for having two,three, or more kids. I'm all for helping veterans, truly disabled people, elderly, and even pets, but not these young people having babies, and not working to support them. I only had one child because that is all I could afford.