Roth Conversion Strategies to Protect Your Spouse's Future Tax Burden
HTML-код
- Опубликовано: 1 июн 2024
- A listener says, “Eventually, one spouse will pass before the other, which will often catapult the survivor into a significantly higher tax bracket. Shouldn’t a Roth strategy take this into account?”
James explores several factors that could positively and negatively impact a survivor’s tax liability and what to consider when creating a Roth conversion strategy.
Questions Answered:
How can Roth conversions benefit married couples beyond tax savings?
What factors should be considered when determining the optimal strategy for Roth conversions to protect a surviving spouse?
=======================
Learn the tips & strategies to get the most out of life with your money.
Get started today → www.rootfinancialpartners.com/
Get access to the retirement software I use in this video and more → retirement-planning-academy.m...
🔔 Make sure to subscribe here to be notified for future videos!
/ @rootfp
_ _
👥 Make sure to connect with us on all socials below → beacons.ai/rootfinancialpartners
⏱Timestamps:⏱
0:00 - Steve’s question
3:40 - An example
6:41 - 3 changes
12:32 - Positive impacts
15:22 - RMD calculations
16:45 - Widows tax penalty
19:46 - When to do Roth conversions
23:40 - Big age gap
28:45 - Start with a good reason
29:57 - The bottom line
Other videos we think you'll like:
About Root: • Financial advisors wit...
Worried about retirement?
Start here: • Worried About Retireme...
![A Day To Remember: Feedback [OFFICIAL VIDEO]](http://i.ytimg.com/vi/iXVnysmQ4e0/mqdefault.jpg)
“Suddenly single” is an important issue. One quibble: Don’t say “if” one of you passes away. Go ahead and say “when.”
I literally should marry my neighbor (pass on my earrings)
I have seen this with surprised surviving spouse in the first few years after their spouse passed in our tax office! It is hard!
Perhaps another consideration should be to assess the market at the time of Roth conversions. If the market is down, then it is more beneficial to convert versus if the market is high.
That was great, James. Thanks. Only thing you didn't touch on is IRMAA. IRMAA can cause the cost of medicare for 1 person to pay more for medicare than the cost of 2 people. In 2024, for a couple earning $250,000 (MAGI) each would pay $257.50/mth @ ($6,180/yr for BOTH husband and wife). That same income for the widow would cost $633.20/mth ($7,598.40/yr for just the wife).
ugh. that's insane. gotta love gov't
… and a further reason to consider loading up on Roth conversions - if it is likely your heirs will be in their peak earning years (high tax brackets) when you expect to die, do you want to drive them up into even higher tax brackets when they inherit your tax deferred 401K/IRA? They will be required to withdraw and pay tax at their rates, 100% of those inherited funds within 10 years.
My father converted 100% of their tax deferred retirement funds to a Roth IRA. Not only did this simplify my (much less financially sophisticated) mother’s retirement financials and avoid the widow tax trap for her as discussed in this video, but he also eliminated the tax-hit to us “kids” when our mother dies.
Very good point. Tax planning must be for 3 life events 1) Married filing jointly 2) Surviving Spouse 3) Heirs.
This was a great discussion that went over multiple factors that I wouldn't have thought of but seem obvious after you discussed it.
Great video, James. You helped me validate my own reasons for Roth conversions. And wow! You even basically used our situation as your example at 14:15. We bought our San Diego house in 1994 for $250k. It's worth $1.8M. You nailed it!
Thanks James, another great video packed with useful information.
Great topic I rarely see discussed in retirement videos. In the retirement projection software I use, for each retirement projection I run (different Social Security start dates, asset allocations and locations, rates of return, etc.) I simultaneously run 3 scenarios with different combinations of life expectancies for my wife (who's 10 years younger than me) and me. Exactly what is discussed in this video is what has become evident to me. You cannot figure out the different outcomes without some really good retirement projection software however.
What "retirement projection software" do you use and costs? Thank you.
James, thank you for information-packed videos. I learn more and more with every video. Not to mention how easy you are on the eyes.
So clear!
James very impressed with your videos and your knowledge. I have a question on RMD's and changes that may have been made early 2024. I inherited some money last year from my sisters and transferred it into my IRA. I was told at the time that I was required to spend it within the next ten years and could take some each year or wait until the end or something in-between. Recently I was told a change was made that requires me to take out a percentage every year or I will be penalized. Do you know if this is true or not? I'm only 58 and would like to leave the money in as long as I can for obvious reasons.
Holy deep dive!
Great information James!
Quick question; does the step up basis apply for “investment “ real estate similar to the primary residence situation…even if this property was purchased under a 1031 Exchange?
What if you currently live in a tax-free income tax state? Wouldn’t conversions also mitigate a potential future state income tax liability, should one/both relocate then?
Great video James. Interested in your comments on step up valuations for home when one spouse dies. Does that assume home owned jointly? Is that best or should home be owned by trust?
sadly, no one knows when the spouse, or yourself, will pass away
I am so tired of FA’s telling clients not to convert b/c their taxes will be lower in the future. Everything, and I mean everything, should be in a Roth. Would you rather pay taxes on the seed or the tree? This IS financial advice.
Run the numbers. Order of multiplication says seed vs tree doesn’t matter.
I guess this space is not for a true conversation. Just a place for root self promotion. Sad...