The Roth Conversion Sweet Spot: Maximize Retirement Savings (And Avoid Costly Mistakes)

Ready For Retirement

James Conole, CFP®

Investment Planning, Bonds, Education, Stocks, Cash, Business, Dividend Investing, Retirement Planning, Retirement, Investing, Tax Planning

5 • 706 Ratings

🗓️ 9 July 2024

⏱️ 25 minutes

🔗️ Recording | iTunes | RSS

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Summary

Listener Nael opens up a discussion about Roth conversions. There are benefits to doing Roth conversions, but can you do too many? Are there any downsides to Roth conversions? Reaping the tax benefits from Roth conversions requires hitting a specific sweet spot. If you convert too little or too much, you’ll be leaving money on the table. So, how do you find Roth-conversion the sweet spot? James lays out five things you should consider as you plan when and how much to convert: 1. Macr...

Transcript

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0:00.0	Although they have the potential to save you lots and lots of money and taxes over time,
0:04.1	Roth conversions can also be overdone.
0:06.5	And when Roth conversions are overdone, they can be potentially devastating, costing you tens
0:10.6	or hundreds of thousands of dollars over the course of your retirement.
0:14.1	So on today's episode Ready for Retirement, we're going to discuss at what point
0:17.5	Roth conversions become excessive and what you should be focusing on to understand
0:21.6	the right number for you.
0:24.9	This is another episode of Ready for Retirement.
0:27.5	I'm your host, James Cannell, and I'm here to teach you how to get the most of the life
0:30.6	with your money.
0:31.7	And now, on to the episode.
0:35.4	Today's podcast comes from a question from Nail. Nail says the following. James, I love your
0:40.0	podcast and YouTube videos. I listen to several podcasts on my daily walks and yours is by far the best.
0:45.0	Easy to follow, easy to understand, and always relevant. You frequently talk about Roth conversions
0:49.7	during retirement years, especially if one can leverage an after-tax bucket to manage their tax
0:53.7	bracket.
0:58.9	While Roth conversions will reduce lifetime taxes substantially, is there a point at which the tax savings will be offset by limited growth of the portfolio due to the tax payments?
1:04.2	In other words, is there such a thing as too much Roth conversions, can you please elaborate
1:08.0	on this topic and discuss the framework for considering the impact of Roth conversions on portfolio growth from Neal?
1:14.2	Well, Neal, thank you very much for that question and from the kind words about the podcast and YouTube videos.
1:18.5	To answer your question directly, yes, there's absolutely a point at which Roth conversions can be overdone.
1:26.1	And when Roth conversions are overdone, it's not just
	...

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