I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as an individual investment account or employing the services of a retirement planner/financial Advisor.
My CFA Melissa Terri Swayne, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Thanks Ari. This was the video I was looking for to help make sense of my Roth conversion numbers. If you could go into more detail as to why higher levels of spending offset the benefit of doing Roth conversions that would be helpful
My biggest questions is how do I prepare my super hero account for early retirement without getting killed in taxes? Currently my superhero account is mostly mag 7 names.
This all assumes that Roth money can really come out tax free. Politicians being who they are, at some point they are going to see this big pot of money that they can't touch, unless they change the law. As they get more and more desperate, changing the law becomes more and more tempting. After all, it's just "rich" people who have Roth accounts, and they are going to need money for all the "normal" people who are retiring and going to collect Social Security. Social Security is going to need a bail out...
It would be an EXTREMELY extreme circumstance if somehow they double tax Roth money in the future. I *could* see the Roth provision going away, but taxing Roth funds is HIGHLY unlikely IMO. It'd be almost as bad of a political move as making sweeping reductions to SS.
Hi Ari, Does it make sense to do a Roth conversion or invest in a Roth IRA if I expect to be in a lower tax bracket in retirement? I'm planning to retire on low income from my 401K, supplemented by an after tax brokerage account. Both of these should be taxed less than my current income. Is there something i'm missing?
You can do conversions after you retire when you’re in the lower tax bracket. In later years RMD’s can push you into a higher tax bracket. It happened to my mother.
Besides considering the low income you may actually need in retirement for your expenses, you also need to consider the forced reportable income you may experience that you may not even need. That includes RMDs from pre-tax accounts that may push more of your SS and/or LTCGs and dividends to be taxable, as well as IRMAA surcharges on Medicare. All these are indirect taxes that can make you pay easily the equivalent of being in the 22 or 24% tax bracket, even if you think that the income you will be voluntarily withdrawing would only put you in the 12% bracket. A way to estimate this would be by running your numbers in a tax software that estimates your future taxes considering all the variables mentioned above.
Eggplant... Eggplant is AWFUL! I agree with @jonathanfoster Oven roasted cauliflower with a mild chipotle aioli makes life worth living! But I dig the analogy!
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm 59 and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as an individual investment account or employing the services of a retirement planner/financial Advisor.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you
My CFA Melissa Terri Swayne, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Found her online page by searching her full name, I wrote her an email and scheduled a call, hopefully she responds.
oven roasted with oil salt pepper and maybe some other spices and herbs and almost every vegetable tastes amazing
@@jonathanfoster2263 well said
If I can all of a sudden see the future....a Roth conversion is going to be toward the bottom of my list.
“Don’t let the tax tail wag the life dog”
@@matthewbrotman2907 YES
Thanks Ari. This was the video I was looking for to help make sense of my Roth conversion numbers. If you could go into more detail as to why higher levels of spending offset the benefit of doing Roth conversions that would be helpful
Will do!
I need to stop thinking about this thing 30-40 years away and start living more now with my wife and child
But by doing that roth conversion at age 63+ the IRMAA "penalty" kicks in although perhaps not enough to offset the roth conversion.
My biggest questions is how do I prepare my super hero account for early retirement without getting killed in taxes? Currently my superhero account is mostly mag 7 names.
I love cauliflower
@@ld5714 I should have picked another vegetable - I’ve been told!
This all assumes that Roth money can really come out tax free. Politicians being who they are, at some point they are going to see this big pot of money that they can't touch, unless they change the law. As they get more and more desperate, changing the law becomes more and more tempting. After all, it's just "rich" people who have Roth accounts, and they are going to need money for all the "normal" people who are retiring and going to collect Social Security. Social Security is going to need a bail out...
This is so true. Just a matter of time.
It would be an EXTREMELY extreme circumstance if somehow they double tax Roth money in the future. I *could* see the Roth provision going away, but taxing Roth funds is HIGHLY unlikely IMO. It'd be almost as bad of a political move as making sweeping reductions to SS.
I put Cauliflower in my smoothie. 😂
Hi Ari, Does it make sense to do a Roth conversion or invest in a Roth IRA if I expect to be in a lower tax bracket in retirement? I'm planning to retire on low income from my 401K, supplemented by an after tax brokerage account. Both of these should be taxed less than my current income. Is there something i'm missing?
@@ArtArcanus it often doesn’t make sense to pay at a higher bracket compared to where you’ll be in the future!
You can do conversions after you retire when you’re in the lower tax bracket. In later years RMD’s can push you into a higher tax bracket. It happened to my mother.
Besides considering the low income you may actually need in retirement for your expenses, you also need to consider the forced reportable income you may experience that you may not even need. That includes RMDs from pre-tax accounts that may push more of your SS and/or LTCGs and dividends to be taxable, as well as IRMAA surcharges on Medicare. All these are indirect taxes that can make you pay easily the equivalent of being in the 22 or 24% tax bracket, even if you think that the income you will be voluntarily withdrawing would only put you in the 12% bracket. A way to estimate this would be by running your numbers in a tax software that estimates your future taxes considering all the variables mentioned above.
Looks like your cauliflower shirt could use a bit of ironing. 😜Ate a small bit of cauliflower this year, $9,000. Will eat much more next year, $45,000
@@ChristopherEvans-650 you’re right! I was too excited to begin filming 😜
@@earlyretirementari t-shirts do not need to be ironed, ever
Eggplant... Eggplant is AWFUL! I agree with @jonathanfoster Oven roasted cauliflower with a mild chipotle aioli makes life worth living! But I dig the analogy!