The Sweet Spot in ROTH IRA Conversions and Chunking

by | Sep 9, 2022 | Vanguard IRA | 31 comments

The Sweet Spot in ROTH IRA Conversions and Chunking




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Roth IRAs are AWESOME and generally you want to build AND convert to a Roth IRA as much as possible. But when and how much should you convert each year? Some people call this a Roth Conversion Ladder…we call it Chunking!!

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31 Comments

  1. Michelle Mercy

    I need to hire your firm I feel.

  2. JR Catolico

    Got Roll over IRA acct and I need to convert them to Roth IRA then move to my SIDRA account but still I got tax. Roll over is taxable when you convert them.

  3. Stacy Michelle

    Great video!! Any updates for 2022?

  4. muffemod

    Dude doesn't know what he's talking about!

  5. Earl Kimsey

    Is there a time limit on how soon you can draw on converted Ira funds before reaping the tax free benefits of Roth investment returns? I m not sure but I think there is a five year wait on drawing on that part of your Roth investment, if so wouldn’t it be to your benefit to convert your funds sooner rather than waiting until dec 31?unless you think you might not be able to project your end of year income wouldn’t it be better to chunk multiple times in the tax year rather than all at once?

  6. Simeon Slayton

    I have $60000 tax free money I want to put in a self directed Roth IRA. My tax man doesn't know how. He says it has to be funds that has been taxesd.

  7. mj galante

    I just turned 60 and plan to retire at 62. I need help converting my pension over to a Roth IRA

  8. Rick Martin

    to be fair, when talking about jumps in the bracket, NOT ALL INCOME IS TAXED AT THE HIGHEST LEVEL – only the excess above.

  9. D Fong

    Can someone clarify that when we talk about income, are we talking about GROSS i(Total) income or AGI/MAGI

  10. Hapaboy65 M

    Good stuff….BAM! lol

  11. Ellie C. Birch

    I AM NO LONGER WAITING FOR THE GRANT LOAN BECAUSE I EARN $ 18,000 EVERY 7 DAYS RECENTLY.

  12. Nate P

    Question: In 2020, I did a 401K conversion to a Roth IRA. I understand I need to pay taxes on the amount I moved over. I also did a backdoor ROTH IRA as well for $6K. My question is, do I pay taxes only on the 401K conversion to Roth IRA or do I need to pay taxes on both the 401K conversion as well as the backdoor ROTH IRA.

  13. Florence Orpilla

    Hi Mark, new to your station. very informative! Can't wait to watch more. I'm 58 and single, managing a self directed IRA. Couple of questions in your being single scenario, 1. in your chart what happens if your income is between 40K-84K? Do you automatically jump to 22%? 2. Is it worthwhile to begin chunking to a Roth IRA over a 7 year period assuming i allow the Roth IRA to grow without dipping into it for about 10-15 years? 3. Can i use already taxed dollars to contribute to Roth IRA to the maximum allowed? I haven't been able to find info on it. Seems i only info being able to roll 401K/Traditional IRA into a Roth IRA but not already taxed dollars. Thanks for your help in advance.

  14. Jessica Mali

    Thank you so much.

  15. Ramon Altamirano

    Just got 3 books. The bundle..

  16. David Stephens

    This may be a stupid question but if decide to convert 10K of my IRA to a ROTH, can I use my IRA money to pay the tax? Or do I have to pay that out of my non IRA money?

  17. Dennis Martin

    Good video: Just an added note, when talking about the $80k 12% tax bracket you can have income as high as $105k less the standard deduction of $25k which totals $80k keeping you in the 12% bracket. This allows you to chunk more to your roth.

  18. Straitjacket Studios

    Since you have to do your Roth conversions before the end of the calendar year, how do you determine which tax bracket you are going to be in prior to the end of the year?

  19. Stan R

    Your presentation is well intended, however, you should talk about "EFFECTIVE" Federal Tax Rates. You are leading people to believe that the entire conversion amount will be taxed at the the higher rates. You should also talk about the 5-year rule regarding these conversions and also the implications of doing this for a legacy account for your loved ones and how soon they will need to withdraw the funds.

  20. Mike Flair

    If I am young person, go with traditional IRA. Saving those tax dollars today, and paying back those taxes 30 to 40 years from now, how much inflation will impact those payback numbers? ALWAYS go with TRADITIONAL.

  21. ssnydes S

    Thank you for giving single advice! A downloadable diagram with these values and curve would be super handy!

  22. Synthia Moore

    So does this mean you do not have to sell your stocks when you convert from your employee 401(k) to a Roth IRA?

  23. Joseph B Scott

    Mark, if I understand what you are saying, then my formula below is correct. Please look and advise, Thanks!!

    (__% tax bracket maximun amount) – (estimated taxable income) =  maximum rollover amount to stay in "The Sweet Spot"

    Comments??

  24. RETIRED

    I'm 71, retired and would like to convert a Tax Deferred Annuity (a government retirement plan) into a new self directed Roth. Does it make sense to first create a Trust and then the Roth, putting the Roth in the Trust. Can a new Trust have an existing Roth placed in the Trust?

  25. Jamesg33

    Sir, you have zero understanding of how our tax system works. It's a progressive system. As an example, if my adjusted gross income is $85,000, I'll pay 12% on $80,000 and 22% on $5,000. Not that big of a tax hit, even though I'm outside your sweet spot, the so a Roth conversion may make sense. The bottom line is Roth conversions are always a great deal if you're young (and not too far into a higher tax bracket), but not always good if you're older and have a high income, especially if you're near retirement. Look at the rules and do the math.

  26. Rose lee

    Mr john david is the best, recommending him to all beginners who wants to recover losses like I did

  27. Andrew Hurley

    You're really making it seem like tax brackets affect your entire income, and not just the portion of your income that falls into that bracket. That's gonna confuse a lot of people.

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