Likewise Mark!

One must have context!

Because if they go up they wouldn’t be perceived as an expiration of tax cuts but a tax increase and politicians don’t like the optics.

Your IRMAA will go up during the Roth conversion but then it goes away entirely. The math almost always works out for the conversion. As Ed Slott says, you just have to rip the bandaid off.

* “WILL go up” vs COULD go up - depends on Stopping below the IRMAA Penalty for Part B and D

It depends on the type of annuity you have. Some will allow you to do a piecemeal internal conversion while others do not.

If you’re trying to calculate the tax impact of the conversion you wouldn’t use an effective rate. You’d calculate that impact at the marginal rate.

Yes, MN, NY and CA are especially brutal in that regard.

It's still better today than later when they increase the rates.

@@ppumpkin3282 i would still avoid the 32.

I think OR and DC have high income taxes too.

wow, I knew MN was an ultra liberal give money away state so that's why they need your money.

Will your bracket drop at retirement?

No choice but to pay the taxes. Start spending down soon as possible.

Will you always be in a high bracket like this?

yes, pension, ss, dividends @@DavidMcKnight

also rmd's. of 24k,30k,25k,22k,17k @@DavidMcKnight

@@user-tr2td1in1c i would not convert unless you plan on being in a high tax bracket for the next 10 years or so.

thanks Dave. I'm just worried after 2026 if they raise taxes I might really be screwed.@@DavidMcKnight

Maybe but remember her tax rate doubles when you die.

I'm in the same boat 2.0 million IRA except for a $60,000 pension with 50% spousal benefit for life with medical. We are both 59 y/o. However only $125,000 in taxable cash for Roth conversions. So far Roth conversions for us don't make sense. My wife will take SS at 62 y/o due to breast cancer. We will start spending down earlier so RMD's won't be as bad. The ultimate goal is to die with zero or close!

@@HB-yq8gy are you worried about taxes going up by 2030 or thereafter? That’s the primary impetus I see for Roth conversions.

@@DavidMcKnight Either we pay taxes now or later not worried. Government might extend it, or change the rules who knows. So far I heard the argument it doesn’t make sense to pay the taxes out of your IRA to do the conversions and vice versa. New retirement, recommends only four conversion during our lifetime We know one of us will be in the widow’s tax trap regardless.

@@DavidMcKnightEven if Roth accounts don’t get hit with direct income or wealth taxes I can easily see a greedy Congress indirectly taxing Roth accounts by adding Roth distributions to MAGI for IRMAA and social security provisional income, reasoning they should be treated like tax-free interest income is.

A lot of experts are predicting tax rates will have to double to pay for entitlements and service the mounting debt.

That sounds like static analysis to me. Higher tax rates could actually decrease revenue by quashing the economy.

Could you drop to a lower bracket by stretching it out over 8 years instead of 3? I think you’re probably pretty safe from dramatically higher taxes until about 2030.

@DavidMcKnight yes i am considering more spread after talking with my CFP I just signed with today. He mentioned the same idea.

@@steves3234 good deal.

You don’t need software, you just need to know if your future tax bracket will be higher that today and the problem is, that can be a moving target given what we know about the national debt and our nation’s unfunded obligations.

I agree taxes are a moving target, But as someone getting ready to start Roth conversions I need more concrete information rather than beliefs and assumptions. There are so many factors going into the forecast the only way to really get a handle on optimizing your accounts and minimizing taxes is with an iterative program. I can make my tax bracket anything I want. It just boils down to how much tax I will pay today vs tomorrow since my income is only coming from my IRA. @@DavidMcKnight

Correct.

@@DavidMcKnight Actually it's not than simple. You need to understand how the conversion will impact your overall spending across you life. The conversion not only trigger higher tax bill right now, it MAY also trigger higher Medicare bills, etc. Conversions need to modeled on something that looks at all of your money and spending, not just a tax bill.

@@Bob_Zombiei understand all the implications but you might pay more in Medicare tidy and pay less in Medicare AND SS tax down the road. They’re all taxes at the end of the day.

@@DavidMcKnight Right, but I think when most people say or hear "total lower taxes" the implication is that they are talking about Federal taxes. Plus there are implications to all of that with how much SS is taxed. It's a VERY complicated calculation. A lot of people try to over simplify the decision of what to convert and it can't be made in a vacuum ignoring everything else. Ramsey's advice is really directed to the lower end of the 'financial sophistication' market. People who need to understand the basics of 'spend less than you make'. I 100% agree his advice is very poor (and incomplete) around Roth conversions. I've read your stuff David and only found your videos now, I am definitely going to start drilling into them. Thanks for your teaching on this important aspect of retirement planning. Very interesting stuff

Not sure I follow. Wealth managers would be better off NOT recommending Roth conversions because they give up a portion of their assets under management to the IRS. They’re better off not bringing it up.

@@DavidMcKnight financial analysis with Roth conversion recommendations is not likely gratis, or am I wrong?

@@auricgoldfinger8478 Fee only advisors usually charge for a comprehensive plan, only one small element of which is Roth conversion planning.

@@DavidMcKnight A gateway drug

@@auricgoldfinger8478 hah!

Indeed.

Depends on what tax bracket you’re currently in. If in a middle tax bracket I’d convert over the next 8 to 9 years.

@@DavidMcKnight 24%. I had financial planner run the numbers. First two years up to 37 %tax bracket. Then slightly lower after. Would save me 1.7 million in taxes. I also have a inherited Ira. I need to withdraw in 7 years. $600 k. Along with $100 k combined pension. Prolong soc sec till 65.

@@mlee1308 over how many years are you doing the conversion? If you’re currently at the 24% and he’s having you convert at 37% I’m not sure how that’s saving you taxes.

@@DavidMcKnight that’s what the projections show when it comes to rmd. By 75 k will be taking out $400 k and growing each year to 800 k when 90 years old. Also, children will inherit tax free also, huge tax savings for them. If I stay in just 24%, I will never bring down the 3.5 million pretax. It will just keep growing, never moving the needle to bring it down before rmd start. Put it in the computer and see what you get. I’ve been to another financial planner told them to put in the numbers like that, they were shocked also. If you convert within 24%, If convert 300 k for example, the 401k will also grow by that much each year. It will never go down.

Can I open a Roth if I am not working? Right now I am a cash cow !