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Should Mike in Virginia keep using his IRA money to pay the tax on his Roth conversions? How do you do a Roth conversion when you don’t have the money to pay the tax? That’s PeterLemonJello’s question, but is it the question he should be asking? Spitballing Roth IRA conversion strategies to reduce your taxable required minimum distributions (RMD) in retirement, today on Your Money, Your Wealth® podcast 484. Plus, Susan and Mike in Ohio are retired, in the 24% tax bracket, and considering converting $50k or $75k to Roth – should they do it? How is D-Rock and Matilda’s strategy for selling rental properties and doing Roth conversions as they bridge the gap to early retirement? And finally, how do required minimum distributions work on inherited Roth accounts?
Sunshine in Orange County has been waiting patiently since January for a full Retirement Spitball Analysis: how are her assumptions for rates of return and inflation, her plans for Roth conversions, her asset allocation and asset location, her tax planning, her retirement income and retirement spending plans, and so much more? What missed opportunities is she overlooking?
So many excellent Retirement Spitball requests have come in that Your Money, Your Wealth® hosts, Joe Anderson CFP®, and Big Al Clopine CPA can’t handle them all.
On these bonus episodes, called YMYW Extra, producer Andi Last enlists the help of the experienced professionals on Joe and Big Al’s team at Pure Financial Advisors. In today’s YMYW Extra number 1, thanks to David Cook, CFP® from Pure Financial’s San Diego headquarters, Sunshine finally gets her Retirement Spitball Analysis.
Should 70-year-old Bob live off of capital gains and dividends from his mutual funds plus Social Security, or should he sell poor-performing mutual funds for living expenses and reinvest the cap gains and dividends? Which account should Neal’s 76-year-old Mother use for living expenses? Should Neal and his wife fund their Roth 403(b) until retirement, or contribute to the regular 403(b) and then do Roth conversions after they retire? Plus, Joe and Big Al spitball on whether IndyGuy can retire at 64 and Die With Zero, and Rod doesn’t want a spitball, but he’d like a dart on the wall as to whether his retirement savings will last until age 88.
So you won the lottery – congratulations! After you celebrate, should you rip off the band-aid and convert the entire lump sum payment to a Roth IRA? Also, Bucky in WA is required to have the same asset allocation in his traditional and Roth 401(k). Joe and Big Al spitball on his options, along with the pros and cons of consolidating retirement accounts for Scott in NC, and they explain the spousal Roth IRA for Rock Rochester in Manistique, MI. Plus, should Scott in Jackson, MS sign up for the state public employees’ retirement system or a traditional retirement plan? Can Driving Fast, Loving Life in TX speed away in her Porsche from RSU capital gains? And should she and her hubbs retire abroad? Finally, can Sean in Reno, NV buy a million-dollar vacation home in 10 years, and can Jennifer in La Mirada, CA afford to retire after being forced out of a 21-year career?
Are there ever times when going all Roth isn’t the best strategy for your retirement savings? How do you determine the break-even point on doing Roth conversions? Joe and Big Al spitball on marginal vs. effective tax rates for Joseph Allen, saving to after-tax brokerage or pre-tax 403(b) for Gigi in Illinois, the arithmetic of Roth conversions for Carl Spackler in Florida, and the mega backdoor Roth for Jefe in Texas. For something completely different, we’ll wrap it up with a discussion of tax forms that need to be filed for your solo 401(k) depending on the account balance, for Smitty in The Villages.
Will Duke and Daisy’s retirement spending plan work? If you’re a fan of hearing Joe and Big Al debate, you’re in luck, as they disagree on assumptions when it comes to retirement planning and withdrawals. The EASIretirement.com calculator says Chuck in South Carolina could convert even more to Roth, and the fellas spitball on the pros and cons. Plus, what should Chuck’s asset allocation be for his daughters, and how should Scott in Kansas City’s parents allocate their assets? Can Rothaholic undo his Roth conversion? Brian Fantana and his wife are in their 30s and want to retire at 60. Are they on track? Ricky in Alabama wants to avoid Medicare’s IRMAA, or income-related monthly adjustment amount. Should he spend from his IRA or from his Roth? Daniel in Whittier wants to know what exactly counts for IRMAA income, anyway? And finally, Elisa in Fremont wants to know, with the new SECURE Act 2.0 rules, when can you transfer 529 college savings funds to Roth?
Jimmy in Wisconsin will have a pension and Social Security. How should he cover his seven year retirement shortfall? Skipper in Texas has some unusual pension options, which one makes the most sense for his retirement needs? Should Mike and Carol in Virginia wait to do Roth conversions if they’ll be in a lower tax bracket in retirement? Where should Duncan in Texas invest in the 10 years before he retires early? Would it be stupid for Jay Z in Minnesota to miss out on free Roth opportunities? Can Ben in San Francisco’s “friend” use the rule of 55 on a rollover retirement plan? And finally, YMYW is fun, but of limited value, according to a recent review.
Why would a financial advisor suggest that Frank in Lake Wobegon sell a piece of inherited property, pay 25% tax, and invest the lump sum? Mark in Florida is 72 and invested in CDs. Should he go back to his financial advisor, or just buy more CDs? Plus, Adam in Tennessee will have deferred income in 5 years. Should his asset allocation be more conservative? And in order to retire early at age 55, should Lewis in Arkansas delay starting Roth conversions? But first, if Mike’s wife outlives him, how can he keep her in a similar tax bracket?
Rob and his wife in North Carolina are 51 and 44 and would like to retire in the next 3-5 years. Are they on track, and what should they consider as far as Roth conversions are concerned once the tax brackets go back up, which they’re slated to do when that provision in the Tax Cuts and Jobs Act sunsets at the end of 2025? Is Mark in West Virginia on track to retire at age 59 and a half, and do Joe and Big Al have any pointers on how he can find the love of his life? Mike and Gina in Rhode Island are optimistic about retiring early at 61 and 58, but is their optimism delusional? Jake in rural Michigan is self-employed. Can he do Roth conversions to retire at age 60 and hang with Big Al in Hawaii? But first, the fellas spitball on a retirement and real estate strategy for Grey and Elena in Massachusetts.
Big Tex, Paul in Maryland, and Nick in Alabama all need to know how much money they should convert to Roth to pay as little tax as possible. Johnny and June forgot to convert their backdoor Roth money – are they in trouble? Darren in Nevada has no plans at all to do Roth conversions, but surprisingly still listens to YMYW, and still wants a spitball on his retirement and real estate investment strategies. Plus, can Lolly Pop in New Jersey be less miserly and back off on saving for retirement? Can John in South Carolina use this year’s lower income to reduce his Medicare premiums? And finally, if Ordinary Guy in Boston meets an untimely demise, should that change his plans to retire early?
Erik in MN is divorced, and the OC Birdman of South OC is getting divorced. Should Erik contribute to pre-tax retirement accounts or Roth? How should the Birdman and his soon-be-ex time the sale of their house and the filing of their taxes? Plus, Don has questions about the 401(k) rule of 55 and excess 529 plan college savings. Valerie in Portland wants to know what to do with her old 401(k), and how to invest her new retirement accounts. An advisor tells K-Dog in IN to save cash or open a Roth, then live on those funds and get free ACA “Obamacare” healthcare in early retirement. Is that really possible? Also, what should be Laura in WA’s sequence of retirement withdrawals, and is there any benefit to her doing Roth conversions? Should RJ in CA convert his or his wife’s rollover IRA to the top of the giant 24% tax bracket?
Are there general guidelines on what percentages of your investment portfolio should be in tax-free accounts like your Roth, tax-deferred accounts like your 401(k), and taxable accounts like your brokerage? Joe Anderson, CFP® and Big Al Clopine, CPA spitball on tax diversification today on Your Money, Your Wealth® podcast 468 for Brian in Naperville, IL. William in NH also wants to be tax-diversified. Is his Roth conversion strategy a mistake? Should he be converting much more to Roth? The fellas also do a retirement spitball analysis for Tom in Spokane, WA, and for Claire in CO, who wants to retire next year. Plus, how does Matthew in CT calculate excess Roth contributions, and how should Thomas in IA reallocate assets he over-contributed to his brokerage account? Now that Sean in FL no longer has a traditional IRA, can he use the backdoor Roth strategy? We kick things off with a question from Joe in Dallas on how to account for taxes on the money you’ll be spending in retirement.