Fixing 10 Common Roth Conversion Misconceptions (Costly Errors)
20,033
Published 2024-05-10
Timestamps:
0:00 Fixing 10 Roth Conversion Misconceptions
0:10 #1 - There An Inherent Benefit to Roth Assets
1:48 #2 - Anything I Convert Will Be Satisfactory
4:37 #3 - Next Generation Misconceptions
7:01 #4 - You Need to Wait 5 Years to Touch Your Conversion
7:47 #5 - Roth Conversions Prevent Roth Contributions
8:29 #6 - Conversions Only Make Sense if You Pay Taxes Outside of Your IRA
9:44 #7 - I Can Pay Conversion Taxes Next April
11:09 #8 - There is Just One Conversion Goal
12:18 #9 - Tax-Free Retirements are Great!
13:46 #10 - I Need to Be Done With Conversions Before RMDs
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All Comments (21)
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I'm 62 and just retired last fall. I just did my first conversion last month. I'm leaving my entire portfolio to my children to help them with their retirement, or to be passed on to my grandchildren, because I don't need it. I'm paying the taxes out of savings. Thanks for the informative video.
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You are one of the few that understands the rules and uses MATH to determine the best course of action. Thank you for sharing.
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Learn the most from your videos. Great topics. Keep em coming
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This is one of the best Roth conversion discussions I have seen and demolishes the notion set forth by others that there is only one optimal way to do this and for a fee we can tell you. Well done!
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#5 is fascinating to me, because backdoor Roth contributions makes it almost completely moot. This is the kind of obscure knowledge I come here for.
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This is great info! Dense and full of actual actionable steps. So much of finance YouTube is fluff, and general info is amazing.
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One thing that makes Roth conversions so appetizing right now is the low tax rates. Because of the Tax Cuts and Jobs Act, it’s very unlikely that we will be paying taxes at a lower rate years from now. And if you did conversions when the market was down late last year, congratulations. You converted a smaller amount, paid less taxes, and watched your portfolio grow over the past 6 months tax free.
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Every time I watch your videos, I am blown away by the analysis. Also, the blue background is fantastic! What color is that paint?!?!
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Great content! Thank you
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Excellent video!
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Wow, this somewhat “geeky” presentation is loaded with excellent wisdom and smarts! I only wish you had a flat/hourly fee model since even at your lower than typical % of AUM model fee structure, we really have no interest in handing over full management of our assets. We prefer simple and maintaining full control. We’re looking for expertise to review what we believe is already a solid, but not fully optimized plan, not take over management.
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The Commutative Property of multiplication: Changing the order of factors does not change the product.
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Please review the state Tax Department guidance concerning Roth conversions.For example, your 401K type account or IRA could be considered an eligible retirement plan as such for state tax purposes only - state/FED employees for example. Furthermore, you need to review 1099-R box 7 as there should not be any check marked if pension payment. Know the rules for your state and tax treatment of conversions!
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Great video, Eric. Can you speak to Roth conversation misconceptions in regards to Back Door Roth operations?
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This is EXCELLENT
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I love all of your videos - they are incredible. However, on point #9, if you are taking Social Security while withdrawing from your IRA, there is no 10 or 12% bracket. Filling the 0% bracket with withdrawals is optimal - as you mentioned in the video.
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I have a sizeable pension and I have taxes withheld from that pension to cover taxes associated with converting from my rather large traditional IRA. This allows me to pay the taxes from the taxable "bucket" while avoiding quarterly tax payments from savings or paying from the conversion itself. This is especially useful for me because I participate in some real estate limited partnerships that don't generate K-1 information in time for the first and second quarter of the year.
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Item 9 was eye-opening to me. I now understand how continuing to receive some taxable income throughout retirement can make perfect sense.
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Trying to think about this and wondering about timing of conversions during a big drawdown like during 2020? Does that change some of the math in the sense that valuations are lower?
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For #4, something seems off. There are essentially two 5 year rules. You covered one of them but the other is that you also have to have done at least a single ROTH contribution/conversion at least five years ago. If I am wrong, please let me know. Thank you.
