4 Signs You Should AVOID a Roth Conversion (Save on Taxes!)

Excellent substance. I appreciate the way you explain things with brevity. 🙏

Another excellent video. Lots of good points to incorporate into our planning.

Man thanks for the advice! Our clients are always asking these questions it’s good to know

One additional issue that was not mention re: #4 "If you don't have a long life expectancy". At your death and your spouse inherits your IRA, he/she will be forced to take RMD's, but his/her tax bracket just changed from Married Filing Jointly to "Qualifing Surviving Spouse", to Single. The RMD's on a Single could cause him/her to be in a much higher tax bracket. Plus, the standard deduction for Single Taxpayers is much lower. Therefore, making Roth conversions if you don't have a long life expectancy makes sense.

Excellent discussion - particularly #4. Our father converted 100% their IRAs to Roth and while I do not know his before and after tax rates, that move simplified life for our surviving mother. She is far less financially sophisticated than he was. And of course, he simplified life for his three kids, who already have their own tax complexities due to being in or near retirement.

Other factors: spouse dies and now you are tax filing as single instead of married filing jointly tax brackets. Also pair up large ira withdrawals with large medical deductions such as long term care costs.

Thanks for the confirmation, James.

This is great advice but I would like to point out that the RMD table is designed to liquidate the majority of your IRA assets over your lifetime. The fact that the percentage distribution increases as you age it assumes that the account balance has been reduced by previous distributions. Your 4% at age 75 vs 8.2% at age 90 example is misleading as it will likely be on a smaller balance.

Watch you all of the time. Finally just subscribed so I am not a scofflaw anymore. Good video. I think reason 2 outweighs reason 1. If you stay invested in equities in retirement for the long haul, then it can be really easy to get into RMD trouble over time -- even if you don't need that much money to live on.

Thanks James for another very informative video!

James, you are THE BEST!!! (even though my husband was confused by this; I know exactly what we need to do.)

I answered no to all 4 questions and am very happy that I have made substantial progress making strategic Roth conversions over the last 9 years! Thanks for your great videos!

If you take into account the growth of a stock market portfolio, the tax aspect may change a bit. I expect my tax rate to drop significantly when I retire, but I would still be paying tax from pulling money out of my taxable stock brokerage accounts. The question then becomes one of what is the breakeven. I calculated that the breakeven in my case would be if the account grows more than 46%. If it grows more than 46%, then it is better to do the Roth conversion before it starts to grow. The probably of it growing over 46% in the stock market over a 20 year period is very high. I did Roth conversions over the last 2 years, and I am close to breakeven even after the recent drop in the stock market. Before the recent market drop, my account growth was 60% over the last 1.5 years. In this case, it has almost broken even, so was a good idea to convert. The key to this to pay the tax out of taxable accounts. If you don't, the breakeven percentage is significantly higher (e.g. 150% growth versus 46% growth). It is my sense that one has to consider expected portfolio growth as part of the determination.

This is EXACTLY what I needed to know. I’m 57 and will have a few million when I’m required to draw. I have ZERO heirs so I plan on donating to charities and could not find quality information that wouldn’t cost me thousands a year in taxes…Thanks for the info you consistently provide.

I'm trying to figure this roth conversion idea out... We definitely plan on being in the lower tax bracket when we retire and start pulling out.. Everything is paid off... Just keep it under that ninety two grand or what have you... And maybe convert the "difference" between the one tax bracket and the next 1 up if we do keep it low..

Hi James: I expect to continue full time or part time work making 300k to 500 K until age of 70 , so I don’t see my taxes going down significantly and I will not have that drop in income that most will have if they retire at 62 or 65. Can you do a video about financial and tax planning for professionals who will continue to work until age 70 with a higher income,and does it make sense to stop investing in IRA or 401/403b for such individuals and just invest in a brockerage account. Thank you for all that you do, I have learned a lot from your videos.

Another reason to do a conversion is to reduce your taxable income for ACA qualifying. I’m not sure how the math works out, but I know someone who uses a mix of Roth and pretax to save on medical premiums. He retired at 59 and medical coverage would’ve been very expensive otherwise.

So glad 100% of my retirement contributions are 100% Roth IRA/Roth 401k!!! Being in the 12% US federal tax bracket makes 1000% sense!!! My retirement income will close to 100% income tax free!!!

One other reason to not do a conversion might depend on where you plan to live. If a resident of California is considering a move to a low or no-tax state, it would make sense to wait to do the conversion until you are a resident of that state.

There’s also the age factor. As one ages, there is less time/risk capacity to dollar cost average new contributions into a Roth to offset Roth investment losses. And the five year holding period for growth, if it even grows at all makes Roth kind of illiquid, sort of like Webull’s IRA match. Also older folks need to plan for mental decline that may all of a sudden happen in 60s-70s, at which point they may lose the ability to make wise shopping/purchasing decisions with the Roth tax free growth that you had to wait 5 or more years before accessing tax-free.