Should I Convert My $1,000,000 to a Roth IRA?
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I've been doing incremental Roth conversions ever since 2010 or so; at the time, I was a contractor, and thus I had 3 month increments every other year or so that I had to take time off between contracts. So, I'd make sure I was always snuggled up to the max of my income tax bracket (24% or so, at the time) during those years. Usually it was 20-40k a year I would convert.
I got all the money into IRA to start through the traditional 401k-to-IRA conversions. Again, as being a contractor, I had to be unemployed every 18 months or so, so I would transfer from my 401k during that time into my IRA.
Nowadays my income is too high (in the 32% bracket) to optimize for that; I get more benefit from taking my pre-tax contribution than I get from the Roth conversion. (At my current savings rates, I'll probably be in the 24% income bracket when I retire.) However, I'm still using the backdoor and mega-backdoor strategies to get 25% of my income invested.
Additional investment income (if any) goes towards I-Bonds (I'm saving to pay off my mortgage within a few years), or else a conservative mutual fund that can act as a bridge account for potential early retirement.
I'm also forcing myself to not save as much; I'm in my late 40's, so it's now the "time to ease off the gas a bit", and enjoy the deferred gratification a bit more.
luv the food for thought in this vid
Fantastic advice!
Taking this question as is seems more like click bait. Should have reached out to this person to get their relevant info. No idea of age, retired or not, sources of income, expenses, current tax bracket, etc. Would have made this video worthwhile.
Always pay conversion taxes from outside source. Move to a state with no income tax when retired. Start conversion in first year of retirement and spread conversion over 10+ years.
Hesitant to lose the future earning potential. Waiting until at least $4 million is in my account. Should be there in three years. Moving overseas in October, so Medicare will be useless to me.
One thing you guys didn’t mention is: is there a difference in the Roth conversion if you can pay your taxes from outside ira dollars versus using a portion of the conversion to pay the incurred taxes? I’ve heard people say that if you have the cash in a taxable account, that it would make it more likely that you should convert because it’s essentially like turbocharging an IRa with dollars you didn’t have to directly put into the account
Just convert as much as you can to remain in whatever tax bracket you are willing to be in each year before 2025 while the tax rate is still low. After 2025 maybe the tax rate will increase so why not convert as much as you can before then?
Just opened a Roth IRA watching this video lol
When they talk about qualifying for abound wealth do you need to have 400-500k in assets NOT including your house?
Leave that as is and start, if not already doing, only contribute to Roth going forward. That would wipe out way too much doing it at once.
What matters more: the current marginal tax rate vs later marginal tax rates, or the total tax paid the day of the conversion vs the total taxes paid on withdrawals without a conversion?
Ideally some basic advice can be given.
Pretty sure in any situation it probably isn’t a good idea to perform a conversion on the entire amount.
People need to remember there is a standard deduction each year. Married file jointly is 25-26k standard deduction. If one converted all in 1 year then it’s only one standard deduction vs doing over 4 years as an example.
Also we are talking a million here. Who has 300k or so in set aside cash to pay taxes on the conversion in one year.
How long did it take to get $1,000,000 in a Roth IRA? If the max contribution has been $5500 to $6000?
All at once.
I have 3.5 million in trad 401k. I’m converting all of it. Before 2026. Kids inherit tax free.
Break up converting over years. Not financial advice
Brian is at it again! I am inspired by his channel. Brian inspires me to continue my own YouTube channel on Finance and Investing.