Rethinking Roth Conversions

We try to continue to provide financial advice in a language you can understand.

And Christian, I know that many times we hear from so many of our clients that call and ask about their desire to explore a Roth conversion.

And while that might make sense for some, and apparently if you watch social media, it seems like everybody should do it.

We're finding that less and less and less people seem to have it make sense for them.

Yeah, absolutely.

And the other thing about Roth conversions is people come in and they see, okay, well, I can pay taxes on money now so that I never have to pay taxes again.

And people see this method of what a Roth conversion is, moving money from your normal IRA or 401k into a Roth, which requires you pay taxes when that happens.

Yeah, and that's one of the things that surprises people to start.

They go, well, I just want to take my 401k or my IRA and convert it to a Roth.

Can you do that for me? Well, yeah, sure we can.

But there are taxes to pay.

Taxes? What do you mean taxes? I was going to turn it into something that was tax-free.

That's right.

And so the idea is you pay taxes up front, and then you don't have to pay taxes again.

And often people see that and think, okay, I'm going to convert everything over.

from my 401k to a Roth account.

And we've seen people who have come into the office who have done this as a do-it-yourselfer and finally said, okay, I want someone to help manage the money for us.

And it's already been done.

And so we move on and we plan with what they have and the Roth, but we often see so many missed opportunities.

So one of the examples here is if you converted everything to Roth, And now you're in your 80s, 85.

You're not spending that much money.

The only income you're showing now is your social security.

And that would be because you had converted your IRA to a Roth.

Yep.

You paid the taxes in years past.