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11 rapid-fire spitballs today from Joe and Big Al on Your Money, Your Wealth® podcast number 587, on everything from Roth conversions and RMDs to whether a guy named Wayne can finally treat himself to a $75K Audi. Aaron in Syracuse just hit a million bucks in his 401(k) and realizes he needs a spitball on keeping his RMDs low. Do new Roth conversions restart the 5-year clock? 72-year-old Mike in Texas wants to know. Marion inherited a not-yet-five-year-old Roth, and an IRMAA problem along with it. Lu and Stephen each argue that the fellas’ conversion and retirement spitball math might be misleading. Teachers Tony and his wife have pensions that cover everything, so should they even keep saving? John and Peggy need a retirement spitball, Rajesh wonders if he should pay off his mortgage or convert to Roth, and Mike in San Marcos asks about funding a Roth with pension money.
Should You Do Roth Conversions Before RMDs Start?
If your tax bracket after required minimum distributions begin is likely to be higher than it is now, converting pre-tax savings to a Roth in advance may reduce the size of future RMDs and the taxes on them. Whether it makes sense also depends on your time horizon, your pre-tax balance, and other factors like your current income and available cash to pay the conversion tax. Converting during lower-income years before age 73 is often when the opportunity is largest.
Frequently Asked Questions
Q: Do new Roth conversions restart the 5-year rule if I’ve had a Roth for years?
A: For someone who is over 59½ and has held any Roth IRA for at least five years, withdrawals are already qualified, and a new conversion does not restart that clock for them. Separately, each conversion does carry its own five-year clock that applies mainly to avoiding the early-withdrawal penalty for those under 59½.
Q: Can you fund a Roth IRA with pension income?
A: A Roth IRA contribution requires earned income such as wages or self-employment income, and pension income does not count as earned income. If you have enough earned income to cover the contribution, the IRS does not track which specific dollars you deposit. For 2026, the contribution limit is $7,500, or $8,600 if you are 50 or older.
Q: Are the earnings on an inherited Roth IRA taxable?
A: If the original owner held the Roth IRA for at least five years, withdrawals including earnings are tax-free to the beneficiary. If it was held less than five years, the earnings can become taxable until that five-year period is met, and withdrawals follow the order of contributions first, then converted amounts, then earnings.
Pure’s Senior Financial Advisor, David Cook, CFP®, AIF®, breaks down Roth and Traditional IRAs to help you navigate the nuances between these retirement accounts and identify which works best for you. Transcript If you ever tried to figure out the difference between a traditional IRA and a Roth IRA and which one you should actually […]
Pure’s Senior Financial Advisor, Sumit Mehta, CFP®, AIF®, highlights the most common IRA mistakes people make in their 50s and 60s and how to avoid making them. Transcript If retirement is on the horizon, your IRA is one of the most powerful tools you have. But even the most diligent savers can make a few […]
Juan and Mary in Brooklyn are 49 and 48 with $2.2 million saved. Can Juan afford to retire early, or just walk away if he gets fired? And if they get divorced, yikes – but does the math still work? That’s today on Your Money, Your Wealth® podcast number 573. But first, “Reuben Sailing Shoes” is 68, single, retired, and has $1.6 million saved, but he’s never had a budget in his life. How much can he actually spend? “Leslie and Ben” are federal retirees in their seventies with great pensions and a mix of pre-tax and Roth savings, and “Mork and Mindy” in Delaware are retired with an annuity, a pension, Social Security, and $1.3 million in an IRA. Joe Anderson, CFP®, and Big Al Clopine, CPA, spitball on how Roth conversions and RMD timing can help both couples minimize taxes and make the most of what they’ve got.
Can Jessie and Becky in Iowa retire now at age 52? Should Robert and his wife file their taxes separately, to pay less tax on their required minimum distributions? Can Joe and Al validate Mike in Minnesota’s retirement plan, and does a backdoor Roth make sense for him? How in the world will Mike in New York be able to retire at a reasonable age? And what will retirement income look like for Marty in San Diego? Just spitballs here, no retirement advice!
Can you retire before age 55 simply by contributing to your 401(k) only up to the company match and then saving to a brokerage account? Joe and Big Al spitball on using this so-called tax “jailbreak” strategy to retire early. Plus, is Christine on track to have $150,000 present value to live on in retirement? Is John stuck just watching his money grow and turn into big required minimum distributions? Can Jackie contribute to a SEP IRA and convert it all to Roth? And what do the fellas think of Lee’s I-Bond emergency fund?
Can you convert your health savings account (HSA) to Roth, and do the five-year Roth withdrawal clocks apply? What should you do with money you’d been putting to your student loan debt if you’re part of the student loan forgiveness program? What’s the best way to invest your RMDs, or required minimum distributions? How does IRMAA, the income-related monthly adjustment amount for Medicare, apply to zero-coupon municipal bonds? And finally, strategies for collecting survivor Social Security benefits.
So you’re about to receive a large inheritance – what should you do with it? Joe and Big Al spitball on suddenly becoming $85 million dollars richer. Plus, is it nuts to semi-retire early? Should retirement contributions be split between Roth and traditional accounts? Can you do conversions to your kids’ custodial Roth accounts? The fellas also spitball tax bracket-based Roth conversion strategies to help you pay the least amount of tax possible, long term, and they discuss RMDs on inherited assets and whether to pay off a 401(k) loan if it’s “paying” you 8% per year.
We’re hearing more about fixed indexed annuities with these volatile financial markets. Is it time to reconsider? Plus, clarification on required minimum distributions being waived for non-spouse IRA beneficiaries in 2021 and 2022, taxation on trusts, and suggestions for a 40-year-old considering an early mini-retirement. Also, can a 62-year-old immediately withdraw Roth conversion money? Finally, a strategy to claim Social Security early while working and invest the difference in a Roth, and Joe and Big Al attempt to explain family Social Security benefits without phoning it in.
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Should you save for a house down payment or invest for retirement? How much long term capital gains tax do you pay on a rental property when you sell it after 20 years, and how does a 1031 exchange work? Also, opening a Roth IRA with the Backdoor Roth strategy, and the 5 year Roth withdrawal rules explained. Plus, a couple retirement spitball analyses: are you saving too aggressively for retirement? Can you avoid the Medicare IRMAA, or income related monthly adjustment amount, and high taxes from required minimum distributions?
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Equitable accumulators, cash management accounts, and Social Security: with today’s market volatility, how can you squeeze a few more dollars of income out of your retirement savings? Any reason not to use a robo-advisor for decumulation, in other words, spending down those savings? Plus, a pension retirement spitball follow-up, and is it possible to avoid tax liability on a lump sum withdrawal from a 401(k)? Finally, is Joe’s marriage the canary in the Coors Light Party Ball for YMYW?
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Required minimum distributions: how do they work, when do you have to take them, and do Roth IRAs have RMDs too? Plus, were the fellas being misleading when they talked about claiming Social Security early vs. late if you save and invest the benefits? Listen for their rebuttal. When you change 401(k) custodians, is it a transfer, or a whole new plan? Can you convert your entire 401(k) to Roth, and should you? Finally, If you’re worried about high tax brackets in retirement, should all your contributions now go to Roth?
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How do you calculate Roth conversions to reduce taxes when you reach required minimum distribution age? What are the rules for RMDs from a Roth 401(k)? How does the 5 year Roth clock factor into a decision to leave money in an old Roth 401(k) or roll it to a new Roth IRA? Do reinvested dividends count as Roth contributions? Do capital gains count towards the capital gains income bracket? Plus, IRA contributions for minors and the unemployed. Finally, how would Joe, Big Al, and Andi spend lottery winnings?
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Spitballing tax-efficient retirement withdrawals, savings, Social Security, and required minimum distributions (RMD). Plus, leveraging whole life insurance, and is investing 15% of an all-stock portfolio in preferred stocks too risky? But first, Joe and Big Al break down the mechanics and safety of doing a 401(k) to IRA rollover.
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Congress passed the largest retirement savings reform in more than a decade in December of 2019 when they passed the SECURE Act, the Setting Every Community Up For Retirement Enhancement Act. The Pension Protection Act in 2006 was the last major change. What do the SECURE Act changes mean for you, your ability to save […]
