The Optimal Way to Pay Taxes on Your Roth Conversion

In past videos, we've talked about different sources you can use to pay your Roth Conversion taxes.

Everything from paying Roth Conversion taxes out of the actual conversion to paying conversion taxes out of your Roth IRA if you're younger than 59 1/2.

In today's video, we round out this topic by discussing the optimal way to pay taxes on a Roth Conversion.

Our goal with Roth Conversion strategies is two-fold:
1. Convert money from less-tax preferenced accounts to tax-protected accounts AND
2. Pay less in taxes today than we will pay down the road

You will see as we go through this video, this 'tax paying' strategy accomplishes both of these.

In this video we discuss:
✅ How the right Roth Conversion strategies result in large conversions ending up in your Roth IRA

✅ How to avoid underpayment penalties and estimated tax payments by paying your taxes on time

✅ How to optimize Roth Conversion taxation and save on taxes throughout your retirement

#RothConversion #RetirementIncomePlanning #TaxPlanning

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

[jjf]

Great vid. You're a financial wizard even if it means I have to watch your videos a few times to absorb it all. I realize you know your stuff & I can learn so much from you!!! Don't change the level of detail you provide it's not too much, I just realize that I need to give your videos my undivided attention. Thanks for making these videos.

[Fallguy]

18:10 Pay conversion taxes asap, don't wait until April 15th. IRS wants there cut as you go.

[minhjan]

Subcribed and " liked"! Your video is very informative! Many thanks!

[jimlow]

Great video series! I missed the boat and didn't do the big Roth conversions before I hit age 72. Since my kids will be in higher tax brackets than me, I'm doing Roth conversions now. My RMD helps with paying the taxes.

[EVATUBE]

Thank you for this! this is really very helpful. you've outline the various options and for me i would say paying the tax from a NQ account makes the most sense (for me) as i would want the maximum dollars into Roth. Keep up the great work!!

[markreichman]

They always show the 22% bracket for married couples. Single filers will be most likely be maxing out fhe 24% bracket since max amount for the 22% bracket for single filers is low.

[richardallen]

Going to see my Financial Advisor just after Christmas...This makes a lot of sense

[thomascass]

Excellent points made in this video! Keep up the good work!

[stockae]

What about saving cash to live for a year or two, then convert the amount of your annual standard deduction?

[kwok-keungchow]

Age: 63
Roth IRA: Established more than 5 years ago
Roth IRA Distributions: All tax-free
Balance: Enough to cover taxes due from new Traditional 401(k) conversion

Would it then make sense to convert to the left hand and then pay the taxes from the right hand of the same Roth IRA account, knowing the opportunity cost may incurr? But any taxes paid carry an opportunity cost.

Assuming the future gains from the Roth IRA and a Brokerage Account are equal, I'd rather pay the taxes from the Roth IRA (with tax-free distributions) than selling the equity from the Brokerage Account and incurr immediate long-term realized capital gain taxes.

Am I correct?

[michaelmclaughlin]

How about paying the taxes out of your RMD to cover both the taxes on it and the taxes on the additional distribution you make into your Roth? For example my RMD is $60, 000, I want to also convert $60, 000 into my Roth. I withhold all my estimated tax liability from the RMD. Isn’t this best? I’ve avoided the worst of IRMMA and will keep my marginal tax rate near the top of 22% bracket

[peterkuntz]

if one an existing Roth IRA account why not use the monies in it to pay the tax on an upcoming Roth conversion?

[tonyd]

Thank you for your videos. (Very descriptive and helpful). Respectfully, ¿how does one make a tax payment on a Roth conversion [from a taxable/savings acct], please? Also, can one make more than one Roth conversion per year? Thank you again for your videos.

[cliffluxion]

Appreciate the helpful content. BTW, I have a great plan, but I can always use more money. 😁

[spectator]

In addition, you are indirectly moving a considerable amount of money out of a taxable account into a Roth account (tax-free going forward)

[michaelnitake]

When doing a Roth conversion can you use a line of credit to pay taxes if your short temporarily until the next. Calendar year

[helenwood]

@SafeguardWealthManagement Looking at IRA assets to convert in Dec. 2023, I chose bond funds because they showed a negative cost basis. I thought I would pay less in taxes this way. Is my thinking correct?
Also, is there a way to harvest the loss to benefit my taxes with out running afoul of the 30 day no repurchase rule?

Thank you for your help.
I'm enjoying your channel. 👍

[BW-kvwj]

I have about $1.0M in a traditional IRA and about $300, 000 in an inherited IRA. How can I reach you to help me and manage it into a Roth?

[jefflloyd]

Sirry, mind bender, does it make sense to use the cash fir the conversation, but then replace the cash from the Roth after the conversation ?

[lamleg]

Why not cash in your saved HSA receipts that you've saved up 5 or 6 years and use that cash to pay the taxes?