Are you looking for a tax strategy that may help reduce the amount of taxes you pay during retirement? How about a strategy that may help increase the lifespan of your retirement portfolio? If so, then a Roth conversion may be the right move for you.

In this episode of The Year You Retire, hosts John Bever and Jim Uren delve deep into the world of Roth conversions. They reveal the potential tax savings that a well-timed Roth conversion can provide during the retirement years. Through their insightful conversation you’ll gain valuable knowledge and practical strategies to help you determine if and when a Roth conversion may be right for you.

In this episode you will:

• Discover how a Roth conversion may help you maximize your retirement savings.
• Understand the rules you must know before completing a Roth conversion.
• Find out the eight considerations to keep in mind when deciding on a Roth conversion.
• Learn about the Social Security tax torpedo and how to avoid it.
• Gain a better understanding of our tiered tax brackets and how to use this knowledge to make an informed Roth conversion decision.
• And much more.

The key moments in this episode are:

01:00 - The Power of Roth Conversions

Jim and John discuss the benefits of Roth conversions, including reducing lifetime income taxes and disinheriting Uncle Sam. They highlight the potential for stretching portfolio lifespan and paying less taxes over one's lifetime.

04:10 - Overview of Roth IRAs

John provides an overview of Roth IRAs and explains the difference between pre-tax traditional funding and Roth funding. He also mentions the potential for tax-free gains in a Roth IRA after age 59 ½.

07:01 - Understanding Roth Conversions

John explains that a Roth conversion involves moving money from the pre-tax side to the Roth side, providing control over when to pay taxes. He also discusses the options for paying taxes on the conversion.

10:20 - Factors to Consider for Roth Conversions

John delves into the complexities of determining if a Roth conversion is right for an individual, highlighting considerations such as federal tax brackets, IRMAA brackets, state tax brackets, the Social Security tax torpedo, the five-year rule, and more.

16:19 - Exploring the Impact of IRMAA on Medicare Premiums

John explains how income-related monthly adjustment amounts (IRMAA) can lead to increased Medicare premiums as income rises, and how this should be considered when planning Roth conversions.

18:40 - State Income Tax Considerations for Roth Conversions

John and Jim discuss how state income tax laws can impact Roth conversions, with specific emphasis on the benefits for Illinois residents who can avoid state taxes on Roth conversions.

20:14 - Navigating the Social Security Tax Torpedo

John delves into the complexities of the Social Security tax torpedo, emphasizing the regressive nature of the tax and the importance of strategic Roth conversions to mitigate its impact.

23:46 - Understanding the Five-Year Rule for Roth Conversions

John highlights the five-year rule for Roth conversions and its impact on accessing converted amounts, especially for those under 59 ½, providing insight into the considerations for tapping into Roth funds.

29:30 - Qualified Charitable Distributions (QCDs) from IRAs

Learn about the benefits of giving money directly from your IRA to a charity through QCDs and how your intent to use QCDs should inform your Roth conversion decision.

31:34 – A Summary of the Considerations for Roth Conversions

Gain insights into the eight key considerations for Roth conversions, including tax brackets, legacy planning, and charitable intent. Understand the importance of tax diversification for future flexibility.

Disclosure:

The views expressed in this podcast are not necessarily the opinions of Phase 3 Advisory Services or Osaic Wealth, Inc. and should not be construed directly or indirectly as an offer to buy or sell any securities or services mentioned herein. Unless otherwise specified, show guests are not securities licensed or affiliated with Phase 3 Advisory Services or Osaic Wealth. 

Investing is subject to risks, including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure profit nor protect against loss. Please note that individual situations can vary. Therefore, the information should only be relied upon when coordinated with individual professional advice. 

Securities offered through Osaic Wealth, Inc. member FINRA/SIPC. Additional investment. and insurance advisory services offered through Phase 3 Advisory Services Limited, a Registered Investment Advisor.

Osaic Wealth is separately owned and other entities and or marketing names, products or services referenced here are independent of Osaic Wealth. Phase 3 Advisory Services is located at 1110 West Lake Cook Road, Suite 265 in Buffalo Grove, Illinois 60089. Our phone number is 847-520-5545. For additional information, visit our website at phase3advisory.com.