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Roth Conversions

Why Clients Get Excited About Roth Conversions

  • Tax-Free Growth Forever - Once converted, future growth and qualified withdrawals are 100% tax-free 
  • Lock in Today's Tax Rates - Pay taxes at known rates instead of potentially higher rates later
  • Reduce Future Required Minimum Distributions (RMDs) - Roth IRAs have no RMDs duriung your lifetime
  • More Control Over Retirement Taxes - Creates flexibility to manage tax brackets year by year
  • Powerful Estate Planning Tool - Heirs receive tax-free distributions
  • Strategic Use of Low Tax Bracket - Turn lower-tax years into long term advantages

When is the Optimal Time to Convert

  • Between Retirement and RMD age - Gap years before Social Security and RMDs begin
  • Market Downturns- Convert when account values are temporally lower
  • Before Social Security Starts - Avoid pushing SS into taxable ranges
  • Before Medicare IRMAA Thresholds - Strategic conversions can reduce future premium surcharges
  • When you have Cash to Pay the Tax - Paying conversion taxes outside the IRA maximizes long-term benefit

The goal is not to eleminiate taxes - it is to minimize lifetime taxes

No Roth Conversion vs Roth Conversion

Assumptions

Roth Conversion Age: 60

IRA Starting Value: $500,000

Tax Bracket: 24%

RMD Begin @ 73

No State Taxes Modeled


Annual Salary: $120,000, stops at 65

IRA Annual Growth Rate: 7%

Filing Status: Single

Life Expectancy: Age 90

Conversion Tax Paid From Outside Acct

Projections

StrategyNo ConversionAggressiveLong Term Annual
Conversion$0$85,000 x 4 yrs$40,000 x 13 yrs
Total Converted$0$340,000$520,000
Total Conversion Tax$0$81,600$93,600
IRA Value @ 73~ $1,197,000~ $600,000~ $390,000
Roth IRA$0~ $600,000~ $860,000
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Total Spendable Wealth$1,197,000$1,200,000$1,250,000
First RMD @ 73$45,170$22,600$14,700
Lifetime Taxes$325,000$262,000$214,000

The above are hypothetical examples and are not representative of any specific investment. Your results may vary.

Want to know where you stand?

Schedule Your Roth Conversion Analysis

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.