How much money should you convert to a Roth IRA and when should you convert? Today we look at a customer that was trying to figure out how much to convert with the standard deduction so they could fill up the 12% tax bracket and retire next year.
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Cool, but what about social security? Would you just consider it part of the 80k income cap?
i have been looking for the software($600up) to do what you just showed me in just a few minute(and clearly!!!! thank you, thank you, thank you !!! u just saved me at least 600$ only wish i would have came to you first. 6 hours of looking you really know how to break it down to the common folk!
What was the name of the software package you use to run the scenario. I believe you said Nest Egg. Can you provide a link for this?
They are clients not customers!
I like how you used a real world example. Take away for everyone is you have to make a specific calculation to your own situation. My opinion-Roth conversions should be a strategy for many unless you believe the rate the government taxes us will go down. Also, your own taxable income may not go down to a lower tax bracket in retirement when RMDs are factored in and/or you have a pension like civilian or military retirees.
jazzMAN – I am started Roth conversions 3 years ago. And you were right nobody's talking about the withdrawal strategies. And withdrawal strategies are probably as important as the saving strategy. Ok that said, because I am 100% nervous about the future of taxing Roth by the government (it is not IF but is WHEN). When they start taxing I am making a relative low risk assessment that all current Roth plans will be grandfathered in. So, I'm trying to accelerate my conversions in down-markets knowing that I will pay higher taxes as the 'cost of conversion'. My goal, and maybe it's not feasible, is to be ±75% converted in the next 5 to 10 years. Now from my question: can your software help me track all my portfolio and items? e.g., actual performance, and a forecasted performance perspective. It looks like it might but I'm not 100% sure. I will be tracking income, traditional IRA, Roth IRA, taxable brokerage account, add real estate values. Does your software handle all that? If yes where can I get it?
I am "gearing up" to do some "chunking" over a 4 year period. Question: If my adjusted gross comes in a little higher then anticipated (hard to estimate returns on mutual funds), do I owe the higher tax rate on ALL of my income for that year, or only the portion over the bracket amount?
Good question, and good content, but maybe the explanation was a little long ?
Would the following equation be true ?
(__% tax bracket maximum amount) – (estimated taxable income on line 10) = maximum rollover amount
please advise, comments, etc, Thanks
Thanks for sharing
Thanks, very useful. I want to stay within the 12% and I should soon know how much other taxable income I'll have this year, so I'll know how much to move. But, when is it advisable to move into the 22% rate, if you doubt you'll earn more than the top for that rate ($171,050, married) in retirement, even with rmd?
Thank for the imagine video. I am over 60. Does The amount $ converting from 401K or traditional IRA to Roth IRA has to be the same for every year? Or this amount can be varied?
Thank
If you convert too much from Traditional —> Roth IRA and make your AGI go over the limit in that year for contributing to Roth IRA ($140k single / $208k married), would your Roth IRA contributions be voided for that year, or how does that work?
Nice exercise! As this scenario involved someone who was probably on Medicare, I feel that this presentation should have also discussed potential Medicare surcharges (Income Related-Monthly Adjustment Amount, or IRMMA) because that can be significant. If you go into the next tax bracket you only pay tax on each additional dollar but with IRMAA if you go even $1 dollar into the next IRMMA bracket you go into a whole new category of Medicare premiums. Check it out, folks. Also, note that Medicare premiums are based upon a two year lookback at your tax forms, so you need to think about this two years before you hit Medicare.
One other point to my comment below. I am only paying 10% more tax my increased Roth conversion amount and expect to make more than than 10% increased tax paid.
The 26,100 number comes from the 1040SR form (Seniors) with one person over 65 years.
I am starting Roth conversions this year in 2021. Doing the same…trying to keep it in the 12% tax bracket.
0% taxes will be lower in retirement than when you use to work
The original question is nonsense. It doesn't matter what order you realize ordinary income. You can assign any income chunk you like to your deduction, and any income chunk you like to your highest marginal tax rate.
THIS GUY HAS 3 FINGERS 1:32
Could you tell me if ‘ 401K rollover to IRA convert to Roth IRA’ is considered a 401K distribution? Or is it an IRA distribution? If it’s an IRA distribution, then for someone who is older than 70.5 years old, will he or she have to take a separate 401K distribution in addition to the 401K – IRA – Roth?
Love the videos can you guys work with retirement funds held in another country that needs bringing to the states
What is Nest Egg?
81050 – magic number …where did you get that? This is what I need to understand
It’s all good . You have taught us well and we are good on own.
I’m sorry but you just took ten minutes and multiple forms to do a calculation that I did in my head in seconds. I guess it’s because I already knew what the top of the 12% bracket was and what the standard deduction is.
God Bless Homer and Rebecca!
Thanks Dustin it is always easier to understand with the charts.
Dustin, is there a way to get access to nest egg through Jazz?
Do you really need that stupid song?
So why would you do a roth conversion at retirement? Rmds? Affects on ssi?
Do you have to sell the investment in the Traditional IRA and then move the cash to the Roth, or can you simply move the stock between accounts?
Great video!!! Keep them coming .
Dustin on a recommendation from Josh Scandlen to look at your service how do I get a hold of you to discuss your management and fees?
Was really looking forward to this video, but I ended up confused. This was a bit all over the place. Consider slowing down and focusing on the strategy itself, not just using your software. All this got me wanting to do was looking at other explanations online. Like what you do, just not how you are sharing the data this time.
You’re a financial guy? O is a letter and not a number. I guess you’re just a product of the American illiterate tree hugging education. No wonder the CCP won.
Investing in crypto now should be in every wise individuals list, in some months time you'll be ecstatic with the decision you made today.
Thanks
Great information, thank you. Merry Christmas
I am starting Roth conversions this year as well. Playing with last years tax software to get some rough estimates of the damage. I have a couple years coming up in 2026-2027 which are going to create some IRMAA issues when older EE bonds reach maturity. Trying to reduce the RMD amounts that will hit about that same time! First world problems. . . . .
Good information
Homer is trying to get his DOH straight
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Sorry, couldn’t help it