Roth Convert 100% of Your IRAs?! 3 Situations Where it Makes Sense...

It's commonly thought that you never want to convert ALL of your Traditional IRA assets. After all, you want to fill up lower tax brackets in the future. Here are 3 situations that break this mold...

Timestamps:
0:00 How Much Should You Convert?
0:25 When Roth Conversions Make Sense
1:45 Scenario #1 - Guaranteed Income
3:59 Scenario #2 - Large Taxable Account Balances
7:38 Scenario #3 - Estate Tax Considerations

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Always remember, "You Don't Need More Money; You Need a Better Plan"

[pensacola]

Smart discussion.
But, I am in my seventies and sometimes keeping it simple and peace of mind is the best strategy.
Plan some, of course . But if you have the money, pay your taxes and live your life.

[steveb]

Or use it as Long Term Care insurance where the expenses are deductible to offset...LTC expenses can be 50k-100K per year.

[paulsackles]

Thanks Eric; thorough and complete analysis as usual. Side note - consider doing a video on actions to take 5, 4, 3, 2, 1 yrs to retirement. :) Keep up the great Friday video releases !

[j]

Great points! Thanks. Could you please put axis titles on the x and y axes of the tax graph? It’s not clear what I’m looking at. No doubt I could figure it out with enough effort, but labels help.

[phylliscarlton]

Thanks for confirming what I'm doing. Now that I'm retired, I'm on track to make Roth conversions of 100% of my tax deferred 457 plan before I start drawing Social Security at age 70. I have two half pensions and an annuity that will ensure that my tax bracket will never be lower than 22%. My major concern is staying on the south side of IRMAA.

[dennisboyd]

Thanks Eric, I really appreciate your video's. This one has caused me to rethink my approach. So what if your IRA balances are larger than your examples and converting to 32%, does not meanifully impact the balances or future RMD's. Would you raise the bar and convert at 35% or 37% over 7 to 10 years to get to zero?

[artbaer]

Thank you for this presentation on Roth conversions. This is the only presentation I have found that addresses Roth conversions if you are already in a significant tax bracket due to retirements and SS benefits. You helped address the question of "how much to convert" and the benefits associated with maximum conversions.

[EatLeadPal]

I'm 62 and just retired. I have pensions so Roth Conversions it is. I'm using New Retirement software which told me that I would end up with greater wealth doing the conversions. Thanks for the confirmation.

[markbernhardt]

Love the new studio, next I would consider hanging a couple of moving blankets in front of you to take care of most of the room echo.

[Riggsnic_co]

With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.

[ld]

Great video Eric. So one take away could be, only use a rule of thumb if your are willing to risk loosing the thumb ...🙂 Have a good weekend. Larry, Central Valley, Ca.

[pcash]

I’m 59 years old and ran a couple different tax planning and Investment growth projections thru age 90. I was surprised that math showed I should convert at the 32% bracket the next few years to convert 100% to Roth. I do have a pension and substantial taxable account. Before I ran detail projections I’d thought I’d just max out the 24% bracket. So this video makes me feel better about being more aggressive than I had otherwise thought.

[melroman]

One thing I don’t hear a lot about…. Do your conversions strategically when the market crashes. You can move much more at a cheaper price and less taxes. When the market recovers your profit shoots up in a tax free ROTh

[TDSSLegacy]

Great vid. Note: Spelling error on slide “#3 - Estate Tax Concerns” at approx 8 min.

[sboucher]

Glad I found this video. We have the issue of 'forced' income from our brokerage accounts as well as concern about the decreased estate tax exemptions coming at us in 2026. We've converted a ton of traditional IRA to Roth over past 7 yrs but are also looking at needing to reduce an old annuity that hasn't been annuitized yet. We won't get hit with additional SS income till 2027 and RMDs begin in 2029. What factors to consider to help decide how/which order to spend down the annuity vs the IRA during those years. We are not opposed to using QCDs if necessary.

[pware]

One key for those with substantial buckets is to stay under the IRMAA limits and Under the NII tax.. Large or all RMD conversions may save 10-20 years of paying both.
Perhaps if one does convert all their IRA at age 65 in this strategy they should buy a 10 yr term life ins policy since dying early in retirement makes this a very bad idea.
No mention of tax brackets of your children that would inherit an IRA.. for low income situations it may not be a big deal to have to distribute an IRA over 10 yrs.

[billium]

I would like to hear more on the benefits of Capital Gains harvesting at 0% when there is no income (RMD's). My quick calcs suggest that single person with the $40k SSI & $15k of dividends per the example in the video can realize another $15k of CG and still pay only $200 in tax. Even better, CG's from selling stuff will always generate extra cash from the principal so that extra $15k CG sale could easily realize $20k. $40K SSI + $15K div + $20K stock sales = $75K almost tax free!!

[OnCashFlow]

Being a low spender and living a FI lifestyle allows me to easily do the Roth IRA ladder and pay 0% on those partial conversions each year.

[DP-oluv]

Isn't the real question regarding tax rates a comparison of two scenarios. The first scenario is if you perform a 100% conversion of your IRA over multiple years you will have an effective tax rate over those converting years that will be higher but you will have a much lower effective tax rate in the future that will last forever. Compare that scenario with the effective tax rate today over those same years if you make NO Roth Conversions (the do nothing scenario) and the future effective tax rates in the years you must take your RMDls will be much higher compared to if you have no RMD's. The effective tax rate is always higher when you make the Roth Conversions but you are trading higher taxes over a small period of time (say 5-8 years) in order to receive the benefits of a much lower effective tax rate with no RMD's for the rest of your life. By performing the Roth Conversions earlier during retirement and avoid RMD's the benefits are a much lower effective tax rate that will last forever, You should avoid or lower any IRMA premium impacts, and you will decrease the taxability portion of your social security benefits.

[gg]

Im 75 with 1 million IRA. I know this is all ballpark. When would the BE be on the tax savings in the future. I'm in the low brackets now. I dont have heirs.