Roth Conversions - The Costly Mistake Many People Make

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  • Опубликовано: 24 дек 2024

Комментарии • 95

  • @AbeFroman-zx5hs
    @AbeFroman-zx5hs 3 месяца назад +3

    What stinks about IRMAA is you don’t know what the brackets for the applicable year until it’s too late so you have to guess what you want your income to be. Eg. Medicare premiums are based on income from 2 years prior. So 2026 premiums are based on this years income. The stink: you won’t find out out about those 2026 brackets until 2025. Part 2 of the stink: It impact isn’t marginal. You go one dollars into next bracket the impact is ~ 2400 in premiums.

  • @annahopp
    @annahopp 5 месяцев назад +3

    Very good advice and similar to what I teach. Have three buckets, traditional, Roth, and brokerage. Design your taxable income. And consider Roth conversion ladders once your traditional bucket reaches a million. RMDs can balloon to over $300k in required withdrawals if you have too much money in traditional retirement accounts.

  • @wolfy7531
    @wolfy7531 5 месяцев назад +3

    I like that you get the point quickly.

  • @bernaclischurchill4463
    @bernaclischurchill4463 5 месяцев назад +2

    I am definitely going to pay at the 22%, because I didn't do the Roth for my IRA, and IRAAMA will kick in for my Med. Part B, as well, especially since I get a pension. I started taking SS right away because I was scared that the gov would do something to it, and it would not be available. I was not thinking about my impending RMDs, which after my recent calculations are going to be HUGE, and I mean HUGE. Thus, I paying the piper.

  • @MidlifeCrisisManagement
    @MidlifeCrisisManagement 5 месяцев назад +3

    great presentation, Azul!
    thinking I'll add whatever is needed to my wife's pension income to cap out the 12% tax bracket and convert whatever we don't need to Roth each year. getting expenses down by then will be key.

  • @karinhart489
    @karinhart489 5 месяцев назад +5

    I asked my accountant about this & how much could I convert each year without triggering either Irmaa or a higher tax bracket. She was happy to figure it out, and said nobody ever asked her that before.

    • @AzulWells
      @AzulWells  5 месяцев назад +2

      Sounds like a good accountant. I'm glad she was able to help you figure it out. Azul

  • @CaseyMcAllister-p3n
    @CaseyMcAllister-p3n 5 месяцев назад +3

    Excellent content that really clearly demonstrates the need to plan what funds get pulled from the various buckets to arrive at an optimal tax plan when taking healthcare subsidies into account. I found this particularly helpful because it applies in my situation. Thank you for the clarification on this tricky part of the path - I am not as “lost” as I was before watching the video.

    • @AzulWells
      @AzulWells  5 месяцев назад

      I'm glad the video was helpful Casey. Thanks for watching and for being a part of the community here. 🙏 Azul

  • @donhaderle9983
    @donhaderle9983 5 месяцев назад +3

    I might be missing something, but a strategy to execute on Roth Conversions should be done prior to retiring, if possible. Meaning, my taxable income and bracket would be much higher in the year I convert, yet I'm still on my company's health insurance. So I pay my taxes for the convert, and no impact to health care premiums. Assuming no additional Roth Conversions are necessary in the years when I start retirement, then I should be ok I believe.

    • @donhaderle9983
      @donhaderle9983 5 месяцев назад +2

      @DrJillLearnMoreLiveBette-fd4vh well, there is always room, just depends on how much you want to pay the taxman. When I turned 45-ish, I started the process to convert. I have done 5 tranches over the past 5 years, with a few more to go. I've done this in tranches so as to keep myself in a 'no higher than...' tax bracket while also being able to afford the estimated tax bill required for the conversion. Definitely a balancing act.

  • @scoutandscooter
    @scoutandscooter 5 месяцев назад +4

    Great ideas. 20 years ago I had no idea that I would have enough that my RMDs would push me into such a high tax bracket. On one hand, you have no money and you pay no taxes and life is not good. The other, you have a grand life and yet have to hand over a lot of money to the Feds and states.

  • @CG92965
    @CG92965 11 дней назад

    Excellent video again! Learned a lot as usual. Thanks so much Azul!

  • @tomvermeulen1082
    @tomvermeulen1082 5 месяцев назад

    Excellent Azul, I really love when you include the graphics it makes the presentation much easier to comprehend. It seems every video is better than the previous. Thank you for your time and efforts.

  • @Shaunna-o5s
    @Shaunna-o5s 4 месяца назад +1

    Great video, The first $100,000 invested was amazing. But when you hit $300,000 it’s like smashing the glass ceiling! I cried.

    • @Lauradav55
      @Lauradav55 4 месяца назад

      I completely agree with you! My first 100k took a long time and wasn't that special to be honest with you. Once I hit 300K that is the game changer in my opinion. At this point my money is basically making me a pretty good yearly salary. When I go to sleep at night I know my money is making decent money with the help of my FA

    • @McRoland16
      @McRoland16 4 месяца назад +1

      Nice. People often underestimate financial advisors' importance. Over 50 years of data reveal that those who work with advisors typically earn more than those who go it alone. I've been fortunate to work with one for 13 years, resulting in a $1 million portfolio, largely from early investments in AI and other growth stocks.

    • @Shaunna-o5s
      @Shaunna-o5s 4 месяца назад

      I've been considering but haven't been proactive. Can you recommend your advisor? Could really use some assistance.

    • @Lauradav55
      @Lauradav55 4 месяца назад

      "Nicole Anastasia Plumlee" is the licensed advisor I use. Just research the name. You’d find necessary details to work with to set up an appointment.

    • @Shaunna-o5s
      @Shaunna-o5s 4 месяца назад

      I looked up her name online and found her page. I emailed and made an appointment to talk with her. Thanks for the tip

  • @Amy-hs1qe
    @Amy-hs1qe 5 месяцев назад +4

    I sold a house in 2023 which we had lived in for 28 years, so there was hefty profit on it. I now find out that somehow that hefty profit counts towards the year's income, and it's thrown us in the 32% tax bracket. I guess the IRS doesn't care that much of that profit went to purchase two replacing properties to live. I'm dreading what substantially increased amount we'll have to pay for Medicare in the coming year.

    • @gregkloe
      @gregkloe 5 месяцев назад

      Was the profit higher than the capital gains threshold?

    • @liveandretireusa
      @liveandretireusa 5 месяцев назад +1

      "Discovering how the profit from selling our home impacts our tax bracket was eye-opening. It's frustrating that even though we reinvested in new properties, it still affects our income. Planning ahead for increased Medicare costs is now crucial. Thanks for shedding light on these financial nuances!"

    • @Amy-hs1qe
      @Amy-hs1qe 5 месяцев назад +1

      @@gregkloe yes, a lot more than the $500,000 allowed deduction for a married couple

    • @judyjrasmussen339
      @judyjrasmussen339 5 месяцев назад +2

      The IRMAA calculation is based on 2 yr look back at AGI, so yes 2023 high income levels will affect 2025 premiums. There are ways to appeal IRMAA based on special or 1-time circumstances for IRMAA so I suggest you look into that.

    • @gregkloe
      @gregkloe 5 месяцев назад +1

      @@judyjrasmussen339does this mean my Medicare premium will be higher since I’m working up until I turn 65 and will be applying for Medicare right away?

  • @lisagrace667
    @lisagrace667 5 месяцев назад +2

    How is the Affordable Care Act actually affordable? Doesn’t seem affordable for people who are retired for sure.

  • @evelyne7071
    @evelyne7071 5 месяцев назад +1

    The minimum distribution can be put into a Roth if you’re 73 and over, since you have to pay taxes on that money anyway. But, converting a large chunk of cash may be difficult since you can’t touch that money for five years. Five years is a long time in your twilight years.

    • @comingshortly
      @comingshortly 5 месяцев назад

      You cannot convert your RMD to Roth. You would need to withdraw more than the RMD to convert, which is why the Roth advocates say to do it before RMDs kick in.

  • @Gilboa1985
    @Gilboa1985 5 месяцев назад +2

    thanks Azul really helpful.. i am retiring in October and i am 58, the KFF calculator is really helpful

    • @AzulWells
      @AzulWells  5 месяцев назад

      Congrats on your upcoming retirement ... 58, well done! Azul

  • @loud7070
    @loud7070 4 месяца назад

    Great information. Thank you Azul.

  • @daverose2279
    @daverose2279 4 месяца назад

    thansk i am trying to figure out the aca stuff right now to deside if i want to retire or not

  • @05glisedan
    @05glisedan 5 месяцев назад +14

    Poor on paper is the goal...

  • @reginamurray1993
    @reginamurray1993 5 месяцев назад

    Thank you, Azul! You have given me some food for thought and now I can look ahead for planning!

  • @leeward1717
    @leeward1717 5 месяцев назад +4

    1-2 IRMAA BRACKETS up result in much lower increases than taxes on SSA plus RMDS on pretax assets above 1.7M.

    • @liveandretireusa
      @liveandretireusa 5 месяцев назад +1

      "Understanding how staying within 1-2 IRMAA brackets can significantly reduce increases compared to taxes on SSA and RMDS above 1.7M in pretax assets is crucial. This video provides valuable insights into optimizing retirement income strategies!"

  • @liveandretireusa
    @liveandretireusa 5 месяцев назад +3

    "Roth conversions can be a game-changer for retirement planning. Video [#] explains the costly mistakes to avoid, shedding light on smart financial strategies. It's a must-watch for anyone planning their retirement wisely!"

  • @macgeek2112
    @macgeek2112 5 месяцев назад +1

    As retired military who wants to retire at age 62 (less than 4 years away; take SS@67) and start Roth conversions in late 2025 (I use NewRetirement), am I correct in assuming that I do not need a marketplace healthcare plan for the 3 year gap until medicare kicks in as long as I'm okay with paying the 20% with Tricare Select, or changing to Tricare Prime (pay premiums) for those three years?

    • @Mahan1914
      @Mahan1914 5 месяцев назад +1

      That’s my situation. I’m on Tricare select and will hit 65 in a few years at which point I’ll have Medicare. But as military retirees, we are required to buy part B when we take Medicare.

    • @macgeek2112
      @macgeek2112 5 месяцев назад +1

      @@Mahan1914 My current intention is to just have A+B. Shouldn't need "D" and don't want it. I see what the supplemental plan does in limiting what services and support my 83 y/o mother deals with.

    • @Mahan1914
      @Mahan1914 5 месяцев назад +1

      @@macgeek2112correct, you won’t need part D as that’s basically covered by your military plan.

  • @mmettauer
    @mmettauer 5 месяцев назад +2

    You also have to worry about the tax bracket "cliff".

  • @alphamale2363
    @alphamale2363 5 месяцев назад +5

    I had cobbled this info together over the years, but you presented it in a very clear manner.

    • @AzulWells
      @AzulWells  5 месяцев назад

      Thanks for the compliment ... 😊 Azul

  • @Peter-c8y4n
    @Peter-c8y4n 5 месяцев назад

    Excellent video / information to prepare for and consider. Thank you.

  • @Cormin
    @Cormin 5 месяцев назад +1

    I'm sure it's nothing but whenever Azul points with his whole hand it reminds me of an unfortunate historical situation

    • @AzulWells
      @AzulWells  5 месяцев назад +1

      oooh ... I never thought of that. Thanks for the observation. 😳 Azul

  • @NomadicRVLiving
    @NomadicRVLiving 5 месяцев назад

    Very helpful and new information for me to consider. Thanks Azul.

  • @dlipp23
    @dlipp23 5 месяцев назад

    Thanks!!

  • @TycoDogg
    @TycoDogg 5 месяцев назад +1

    Great info, thanks Azul.

  • @nicolasbenson009
    @nicolasbenson009 5 месяцев назад +69

    In these uncertain times, it's more important than ever to have a solid understanding of how to manage your finances, invest wisely and navigate economic downturns. But my primary concern is how to grow my reserve of $240k which has been sitting duck since forever with zero to no gains, sure I'm all in on the long term game, but with my savings are lying waste to inflation and my portfolio losing gains everyday, I need a remedy.

    • @berniceburgos-
      @berniceburgos- 5 месяцев назад +2

      If you need advice, consider speaking with a financial advisor. Don't get me wrong, you can do it on your own, but financial advisors have a lot more knowledge and expertise in this area.

    • @tatianastarcic
      @tatianastarcic 5 месяцев назад +3

      you are completely right, Advisors have information and paths that are not disclosed to the public.. I profited £560k in 2022 under the tutelage of my Fiduciary-counselor. Am I selling? Absolutely not.. I am going to sit back and observe how this all plays out.

    • @Michaelparker12
      @Michaelparker12 5 месяцев назад +3

      That's impressive! I could really use the expertise of this manager for my dwindling portfolio. Who’s the professional guiding you?

    • @tatianastarcic
      @tatianastarcic 5 месяцев назад +1

      Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.

    • @BridgetMiller-
      @BridgetMiller- 5 месяцев назад +1

      I checked Melissa up out of curiosity and i must say i am impressed by her Credentials. i emailed her already, waiting on her response.

  • @michaelt2974
    @michaelt2974 5 месяцев назад

    How is the ACA subsidy calculated if your income year to year from your investments fluctuates

    • @michaelbrown1993
      @michaelbrown1993 5 месяцев назад +1

      It's by each year's earnings. If one year you bring in a lot more income than usual, you will get a lower subsidy than a year where you brought in less income.

  • @Chris-hw2nx
    @Chris-hw2nx 5 месяцев назад

    Excellent video. Lots of content out there about roth conversions but nothing about the impacts you're mentioning. 👍🏻

  • @karens6053
    @karens6053 5 месяцев назад

    If you take or use Roth money for your income, does that count toward this AGI that affordable care act is based off

    • @TShirtAndReeboks
      @TShirtAndReeboks 5 месяцев назад +2

      Roth money is taxed when it goes into the Roth account but are not taxed when withdrawn. It does not count as taxable income.

  • @bobb7918
    @bobb7918 5 месяцев назад +1

    At 63 and 64 it can affect both ACA and Irmma!!!!!!

    • @johnbrown1851
      @johnbrown1851 Месяц назад

      Yep, I'm 63 and thinking about it. It may make sense to bite the bullet and pay the Irmaa surcharge. I don't need ACA . Another factor is converting right now at record highs is not too enticing.

    • @bobb7918
      @bobb7918 Месяц назад +1

      @ I would not wish for my nest egg to go down in value. You don’t have to transfer in kind. You can sell and covert to Roth what you want.

    • @johnbrown1851
      @johnbrown1851 Месяц назад

      @@bobb7918 thanks, that makes sense. I could sell an asset that has appreciated and keep it in a money market fund in my Roth until prices are more reasonable.

  • @heartburn6160
    @heartburn6160 5 месяцев назад

    Is dividend income taxed differently?

  • @tedlaurvik3765
    @tedlaurvik3765 5 месяцев назад +1

    The IRMAA bit me for tax years 2022 and 2023. I will be free of the extra charge once my 2024 income is part of the medicare formula.

  • @michaelbrown1993
    @michaelbrown1993 5 месяцев назад

    I am single and planning to retire in my early 50's. I will be spending from non-tax advantaged brokerage accounts until I am 59. Because of this, my income may at first be too low to qualify for the ACA. I don't think I could get Medicaid, as I have a large amount of savings (multi-millionaire). So, I may actually need to do some Roth Conversions just to hit the minimum income for the ACA eligibility and subsidy. Do Capital Gains and Qualified Dividends count as income for purposes of ACA eligibility? Is my strategy for qualifying for the ACA sound, or am I missing something?

  • @toyarj37
    @toyarj37 2 месяца назад

    It would only make sense if you converted in the year you signing up for Medicare. Why would y’all wait to convert once you retired? Should have did that years ago

  • @MrRikkiRocket
    @MrRikkiRocket 5 месяцев назад

    Great info! Please go back to doing some of your walking videos - your fans go crazy for those 😊

  • @mrallan8063
    @mrallan8063 5 месяцев назад +3

    Income vs Obamacare and IRMAA. Nothing new here. If you convert most of your money to Roth, your Roth investment gains (withdrawals) are tax free.

    • @comingshortly
      @comingshortly 5 месяцев назад +1

      IRMAA issue is overblown and should not enter into the decision. First of all IRMAA limits increase each year for inflation so a 60 year old today who will start RMDs in 15 years could have a $5m IRA without tripping an IRMAA surcharge if there only income is SS and RMDs. If they have a lot of other income then they could have an IRMAA issue later, but in that case converting today would put them in IRMAA surcharges during the conversion years so they can avoid them later, effectively eliminating the benefit.

    • @tedlaurvik3765
      @tedlaurvik3765 2 месяца назад

      @@comingshortly at ~300 dollars extra each month for the next two years IRMAA is not overblown to me. Keith, the timing of conversions is critical. These days I am careful to keep my key taxable income below the second IRMAA tier.

    • @mrallan8063
      @mrallan8063 2 месяца назад

      @@comingshortly if one had $5m in an IRA, they are likely going to pay IRMAA penalties already before getting to RMDs due to their taxable investments. The penalties start at a pretty low $103k for a single person, and penalties could be hundreds of dollars per month. But do what you want to do... i rather pay less than more.

  • @Martinez-j8i
    @Martinez-j8i 5 месяцев назад +75

    This is my favorite channel. Despite the dip in crypto. I still thank you for the level headed financial advice I started crypto investment with $7,500 and since following you for few weeks now, l've got 25k In my portfolio. Thank you so much mrs Elizabeth Slone

    • @gabrieladaniel3015
      @gabrieladaniel3015 5 месяцев назад

      Wow. I'm a bit perplexed seeing her been mentioned here also Didn't know she has been good to so many people too this is wonderful, i'm in my fifth trade with her and it has been super.

    • @Katarzyna-x4j
      @Katarzyna-x4j 5 месяцев назад

      The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a financial professional but is very advisable you make use of a professional.

    • @SorezPatrick
      @SorezPatrick 5 месяцев назад

      Isn't that the same Mrs Elizabeth Slone that my neighbours are talking about, she has to be a perfect expert for people to talk about her so well

    • @dr-jamesthomas4716
      @dr-jamesthomas4716 5 месяцев назад

      I'm new at this, please how can I reach her?

    • @Martinez-j8i
      @Martinez-j8i 5 месяцев назад

      she's mostly on Telegrams, using the user name

  • @miketheyunggod2534
    @miketheyunggod2534 4 месяца назад

    The only costly mistake people make is hiring a financial advisor. They steal your money. All are crooks.

  • @ShannonMcclure-k5d
    @ShannonMcclure-k5d Месяц назад

    Thanks!

  • @CaseyMcAllister-p3n
    @CaseyMcAllister-p3n 5 месяцев назад +2

    Excellent content that really clearly demonstrates the need to plan what funds get pulled from the various buckets to arrive at an optimal tax plan when taking healthcare subsidies into account. I found this particularly helpful because it applies in my situation. Thank you for the clarification on this tricky part of the path - I am not as “lost” as I was before watching the video.