Today's Hack

Chances are you’ve heard a lot more people talking about Roth conversions over the past couple of years. That’s because tax rates are low and many individuals are choosing to pay now rather than waiting when they might be much higher. Is this a strategy that might work for you? Let’s try to cover everything you need to know before converting.

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Show Notes For This Episode

Today’s Hack:

Chances are you’ve heard a lot more people talking about Roth conversions over the past couple of years. That’s because tax rates are low and many individuals are choosing to pay now rather than waiting when they might be much higher. Is this a strategy that might work for you? Let’s try to cover everything you need to know before converting.

Click the timestamps below to jump ahead in the episode…

Other Retirement Facts:

We’ve been working with clients on Roth conversions for nearly a decade as tax planning is a big part of what we do, but it seems this strategy is catching up to the rest of the industry over the past few years.

Some of that has to do with the SECURE Act eliminating the stretch IRA. Roth conversions have become a popular option for those that plan on leaving retirement accounts to their children.

But are Roth conversions a great idea for everyone? The answer is always going to vary by situation, but we want to break down this investment option and look at the pros and cons that come along with Roth conversions. That’s the plan for today’s episode of Phil’s Tax Hacks.

If there was ever a topic that was hand-crafted for our office, this is it and we’re excited to talk about Roth conversions. Phil will even share a few client stories of times when this strategy was on the table.

We will also address a recent study that found a split result about the future of the economy. Consumers are optimistic but corporate executives are the opposite. So who is right? And how much will the Coronavirus play a role in the economy?

And we want close out the episode without a Cash Connection email question, which comes from a listener who is thinking about waiting as long as possible to claim Social Security to cash in on the higher payment. But is that definitely the best idea?

Check out the entire episode in the audio player above or click on the timestamps below to learn more about Roth conversions.

1:49 – In the News: A study found CEOs and CFOs are pessimistic about the economy while consumers remain optimistic in 2020.

3:54 – The Coronavirus could be the trigger for the economy to drop.  

6:02 – We’re talking about Roth conversions today because that’s been a hot topic with the current state of taxes.

7:08 – Let’s begin with what is a Roth conversion.

9:07 – Is this especially helpful if you’re a high-income earner?

10:02 – The assumption is you’ll be in a lower tax bracket in retirement but that’s not always the case.  

10:56 – The common mistakes that Phil sees clients make with conversions.

12:37 – With the SECURE Act eliminating the Strech IRA, will this strategy become more popular?

14:55 – Is there a type of person that might not benefit from a Roth conversion?

16:15 – Are there ages that Roths make sense or is that too generalized?

17:50 – Cash Connection email question: I just looked at my Social Security breakdown and I’m blown away by how much more I’ll get at 70. I’m inclined to wait until then to start my Social Security even though I’m planning to retire at 67. What do you think?

19:50 – Getting to Know Phil: Are you native Michigander? Where did you grow up?

A Quotable Moment:

 

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