$2M IRA—Why I'm NOT Converting to Roth (Even If You Were Told You Should)

Comments · 264

• JA

  @JasonLemal-d4q · 2 months ago

  As a retired person, I can say that being debt-free is paramount.<br>When I retired I had considerably less than $1.46 million, but I have a very comfortable, low-stress retirement. Cheers!

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• PA

  @paulisakson3221 · 4 months ago

  It seems you did forget a major factor: his IRA would likely double in value to $4 Million after 10 more years. This could easily push them into a higher tax bracket.

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• IN

  @InfoSecGuardian · 4 months ago

  Good topic and content. &nbsp;However, like most of these videos, income is treated like tax walls of 10%, 12%, 22%, and 24% are cliffs. &nbsp;They are not. &nbsp;Only the amount of money above each threshold is taxable at the new amount. &nbsp;Thus, if your conversion puts you above a watermark such as sending you into the 24% by a single dollar, then it costs you just 2 cents extra to have exceeded that watermark. &nbsp; I wish these videos would talk about making opportunities out of unfortunate life events:<br>* &nbsp;Low wage year (e.g., layoff)<br>* &nbsp;Excessive Medical costs for a year (e.g., Surgery)<br>* &nbsp;Adoption credits; Solar Credits; Disaster credits<br>* &nbsp;For people that get a percentage of their wages from company bonuses - Years where company has low performance<br>When one works for 45 years, it is not unusual for a life event to occur one of more times during the journey. &nbsp;It is these life events that create opportunity to do conversions without changing your normal tax bracket. &nbsp;Of course, the other side of the consideration is where the tax money come from. &nbsp;That is yet another math challenge.

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• NO

  @northerncaptain855 · 4 months ago

  Thanks, this was helpful!

• BL

  @bl7385 · 4 months ago

  Good job covering the major considerations. I like the BETR model.

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• 30

  @303Estates · 4 months ago

  Awesome Videos!!! My new fav channel !! Keep up the great videos!

• JO

  @JoeTaxpayer · 4 months ago

  I’m glad you looked at IRMAA.<br>And that you acknowledge brackets may change. <br>The beneficiary issue is big for many. High savers with a single child may be best off converting right to the top of 24%.

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• HE

  @hereticalgames3695 · 5 months ago

  Partial conversions adjusting for tax bracketing. There fixed everything. I figured out your solution.

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• CA

  @calvinlim9485 · 5 months ago

  Taxes also have been lower in our lifetimes during the Bush cuts and the TCJA larger standard deductions. Plus there&apos;s upcoming proposed bills that will further increase the standard deduction.

• ST

  @Steve56-w9r · 4 months ago (edited)

  Conversions depend on spending. I&apos;d rather spend that balance down on experiences, helping the kids, etc and only convert if it would still help after the desired spending.

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• DM

  @dmulvany · 5 months ago

  At about <a href="https://www.youtube.com/watch?v=9sMxUQOG7bs&amp;t=450">7:30</a>, you talk about the ordinary income inside the IRA and paying for conversion taxes after it&apos;s taken out. &nbsp;This sounded ambiguous, like you might have thought it was taxed twice.<br><br>I&apos;ve heard some other people appear to be confused about the taxation of Roth conversions. &nbsp;The money from an IRA (or other pre-tax account) would be taxed only ONCE only when it is withdrawn, regardless of whether it is moved into a Roth IRA or not. &nbsp;All money that winds up being transferred to a Roth IRA has typically already been taxed or was already earmarked as being subject to taxation during the year that it was taken out of a pre-tax account.<br><br>You had made a reference to ordinary income inside of an IRA. &nbsp;Since anything that would be earning interest inside an IRA would be taxed at ordinary income tax rates if it was outside of the IRA, there&apos;s really no net loss by deciding to pull that kind of money from an IRA anyway. &nbsp;Furthermore, seniors who are 65 or older have deductions that can eliminate the tax on more than $17,000 of ordinary income (and they may also have part or all of the enhanced $6000 deduction for the next three years although this is prorated at the rate of 6% over $75,000 for singles). &nbsp;Thus in the years between working and claiming Social Security, seniors have a very desirable income valley for doing Roth conversions. &nbsp; &nbsp;(Comparatively few people have pensions.)<br><br>Furthermore, the usual advice about making Roth conversions is to withdraw only enough to fill one&apos;s current tax bracket---or at least the lower tax brackets (like 12%). &nbsp; It would not make sense to convert a large fixed amount without paying any attention to the actual tax cost of doing that. <br> <br>Seniors actually ought to plan to <b>use</b> their currently available deductions against ordinary income, rather than against qualified dividends or long term capital gains that are taxed at lower tax rates. &nbsp;Doing carefully calculated Roth conversions can be an excellent way of taking full advantage of those deductions.

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• DO

  @doyle4543 · 4 months ago

  Good video clear and concise however, there’s no discussion about the potential for a change in the tax bracket in future years and given the ridiculously large deficit in the nation, I would assume we’re gonna see higher brackets, which would change the calculus