The reality of taxes in retirement starts to become more evident the closer you get, and it’s not uncommon for people to wish they had contributed more to a Roth while they were saving. Having those tax-free withdrawals in retirement is wonderful, so what can you do if you find yourself in this position?

That’s the question we’re going to tackle today. Jake Doser, CFP®, CPWA® and Nickolas J. Colantuono, CFP® will break down the Roth conversion and discuss the factors you need to weigh before deciding to convert any money. With it being the end of the year, this is the perfect time to be having this conversation.   

Roth conversions have become a hot topic in retirement planning. The concept is simple yet powerful: convert your traditional IRA or 401(k) funds into a Roth IRA, pay taxes on the converted amount now, and enjoy tax-free growth and withdrawals later. But is this strategy right for you? That’s what we want to help you determine: when and why a Roth conversion might make sense.

One of the key considerations is timing. As Nick points out, “It’s all about when do I pay taxes? How do I pay the least amount of taxes?” This involves understanding your current tax bracket, future income projections, and how these factors align with the benefits of a Roth conversion. Jake adds, “Whether I write the check or my kids write the check, I don’t care. I just care that this money goes the least amount to Uncle Sam as possible.”

There’s always an emotional aspect that plays a part in financial planning. Many retirees wonder if they’re making these decisions for themselves or their heirs. The goal is to minimize taxes for whoever benefits from the savings, whether it’s you or your loved ones.

For those new to the concept, the episode offers a clear explanation of what a Roth conversion entails and the potential benefits and drawbacks. It also addresses common misconceptions, such as the belief that Roth accounts are limited to certain types of investments.

If you want to learn more about tax planning strategies, make sure you get a copy of  the “Are You Paying Too Much in Taxes in Retirement?” booklet. Text the word OFFER to 800-757-0436 to get a complimentary copy. This guide can help retirees assess their tax situation and explore strategies to optimize their savings.

Here’s what we discuss in this episode:

0:00 – Intro

0:54 – Today’s question

1:39 – What is a Roth conversion?

2:57 – How to get money into a Roth

4:34 – Main consideration