WEBVTT
00:00:42.371 --> 00:00:42.850
Hi there.
00:00:42.850 --> 00:00:43.481
This is Craig.
00:00:43.481 --> 00:00:43.691
We are.
00:00:43.750 --> 00:00:44.831
Welcome back to another.
00:00:45.670 --> 00:00:47.831
What's next in retirement podcast.
00:00:48.521 --> 00:00:53.381
You know, we've got a kind of an interesting subject matter that I wanted to kind of run through with you today.
00:00:53.951 --> 00:00:59.381
I, uh, I get a lot of questions from a lot of other folks and our advisors do as well.
00:01:00.070 --> 00:01:00.790
Just asking.
00:01:00.850 --> 00:01:05.831
You know, what's so different about what you guys do, then what everybody else is doing.
00:01:06.820 --> 00:01:12.370
Um, a lot of people wonder, gosh, why, why not just do what my CPA is telling me to do or pay?
00:01:12.370 --> 00:01:14.740
I've got a financial advisor they're giving me advice there.
00:01:15.131 --> 00:01:16.781
They've been helping me for 20 years.
00:01:16.781 --> 00:01:21.911
So, uh, why would I do what's so different that you're talking about when I just listened to them.
00:01:23.441 --> 00:01:32.950
Or, you know, a lot of people, um, you know, they'll call and they'll talk about software that's available and the differences of what we do.
00:01:32.950 --> 00:01:34.061
And what's out there.
00:01:34.510 --> 00:01:37.240
What's uh, what I mean, there's just a lot of questions.
00:01:37.240 --> 00:01:37.631
Okay.
00:01:37.661 --> 00:01:39.790
That's kind of what this podcast is all about.
00:01:39.790 --> 00:01:43.990
This whole episode is, is all about what is so unique.
00:01:44.501 --> 00:01:48.581
Um, in the Roth conversion space and more importantly, what.
00:01:49.150 --> 00:01:56.141
What are the options that are available to somebody to actually kind of pursue down this Roth conversion?
00:01:56.740 --> 00:01:57.430
Uh, path.
00:01:57.971 --> 00:02:03.191
So that's what I want to do this for the next, I don't know, 20, 30 minutes, however long we're going to take to do that.
00:02:03.281 --> 00:02:12.431
What I want to, I want to just kind of go through what's out there in the whole Roth conversion assistance universe, the different things that you could avail yourself up.
00:02:13.001 --> 00:02:15.820
And will it give you an optimal outcome?
00:02:16.570 --> 00:02:22.330
Um, I want to, first of all, though, let's kind of start with, you know, what's a successful Ross conversion.
00:02:22.901 --> 00:02:23.441
Remember.
00:02:24.131 --> 00:02:27.461
These episodes are really all about trying to help you.
00:02:27.971 --> 00:02:31.751
With the what's next in life, whatever that next step is.
00:02:31.751 --> 00:02:37.751
So you've accumulated the big IRA or 401k, and you're trying to figure out what do I do with it?
00:02:37.751 --> 00:02:38.230
So that's all.
00:02:38.230 --> 00:02:39.251
What, that's the next step?
00:02:39.281 --> 00:02:41.020
You're trying to get retired.
00:02:41.050 --> 00:02:42.131
And not sure.
00:02:42.131 --> 00:02:43.390
What should your next steps be?
00:02:43.450 --> 00:02:45.670
Well, that's what we do episodes on you.
00:02:46.121 --> 00:02:50.531
Maybe you're tired of your investment advisor and not sure whether you got the right thing.
00:02:50.531 --> 00:02:52.540
Well, We've got episodes coming up with that.
00:02:52.540 --> 00:02:54.881
So there's just, there's just a lot that's out there.
00:02:54.881 --> 00:03:06.670
But when we, when we focus in today, But we're really talking about is defining a successful Roth conversion and analyzing the different options that are available for you to kind of pick what you're going to do.
00:03:07.631 --> 00:03:08.140
So.
00:03:09.221 --> 00:03:11.711
Let's start with a successful Roth conversion.
00:03:11.890 --> 00:03:13.300
First of all, you want to avoid.
00:03:13.901 --> 00:03:16.691
The absolute most tax you possibly can.
00:03:17.621 --> 00:03:21.251
That will also maximize your potential net worth.
00:03:21.311 --> 00:03:26.200
And if you can also say Medicare premiums, well, that's a bonus, right?
00:03:51.131 --> 00:03:51.251
Yeah.
00:03:51.251 --> 00:03:54.221
So the big picture of how all that gets accomplished.
00:03:54.730 --> 00:04:04.091
Is that you really have to dramatically reduce or totally eliminate your future required minimum distributions or your RMDs.
00:04:04.480 --> 00:04:12.881
And to do that, you have to work on getting the pre-tax accounts as low as possible, even to$0 at some point.
00:04:13.991 --> 00:04:17.321
Potentially, not everybody, but that's, that's the real target.
00:04:17.680 --> 00:04:21.610
That's how you get this big picture of an optimal Roth conversion.
00:04:22.661 --> 00:04:24.940
Game plan put in place and anything shorter.
00:04:25.000 --> 00:04:28.120
This is really, it's just a plan, but it's not optimal.
00:04:28.300 --> 00:04:31.060
And it's possible that you could also waste.
00:04:31.360 --> 00:04:33.880
A ton of tax money without even really knowing it.
00:04:34.540 --> 00:04:38.021
So you, it's kind of like you did good by converting.
00:04:38.560 --> 00:04:39.670
So what's the harm.
00:04:40.091 --> 00:04:52.781
But the actual harm is that you really didn't read and realize that you were leaving a lot of money on the table, or in a lot of instances, you were paying more Medicare than you needed to, to get the same thing accomplished or even more tax than what you needed to.
00:04:53.380 --> 00:04:57.341
You know, a lot of people, we find that stay in the lower tax brackets and do their conversions.
00:04:57.730 --> 00:05:06.310
At the time you add it all up or where their lifetime, they actually spend more money in income tax than if they would have just really gotten after it and gotten to more of an accelerated.
00:05:06.940 --> 00:05:09.581
Position to get the higher tax brackets to get it done.
00:05:10.091 --> 00:05:13.271
So look, you're simply going to have to convert more than you think.
00:05:14.531 --> 00:05:15.850
Faster than you think.
00:05:16.360 --> 00:05:20.141
And at a higher tax bracket than you're probably comfortable with right now.
00:05:20.651 --> 00:05:22.451
In order to hit the optimal number.
00:05:23.920 --> 00:05:25.091
So I'm going to run through.
00:05:25.690 --> 00:05:28.120
Um, kind of a scenario with you that.
00:05:28.661 --> 00:05:33.821
Um, if you're listening to this podcast, it may be difficult to follow the math.
00:05:34.271 --> 00:05:35.771
Um, by just listening to it.
00:05:35.771 --> 00:05:43.420
And so in the show notes, we're going to put a link to a PDF document that will have just kind of the raw basics of what I'm sharing with you here.
00:05:43.420 --> 00:05:43.781
Right?
00:05:44.050 --> 00:05:49.331
So I want to run through an income tax bracket illustration from you that I do in a lot of the webinars.
00:05:49.690 --> 00:05:53.771
To kind of illustrate the point that you have to do this a lot faster than what you think.
00:05:54.461 --> 00:06:00.130
So, first of all, let's just, let's just talk about, let's assume that you got$2 million in IRAs.
00:06:00.461 --> 00:06:02.021
And this, this number.
00:06:02.471 --> 00:06:08.380
What I'm going to go through works, whether you got a million dollars or$5 million or 10 million sitting in your IRA.
00:06:09.071 --> 00:06:18.130
I will tell you that too, though, that I did another podcast that is totally devoted to the four situations in which you probably don't want to do.
00:06:18.790 --> 00:06:20.591
Roth conversions at all.
00:06:20.860 --> 00:06:22.240
And so I'll refer you to that.
00:06:22.240 --> 00:06:29.141
So if you've got less than a million bucks in your IRA, 401k accounts, you probably want to listen to that first.
00:06:29.440 --> 00:06:38.050
That doesn't mean that you necessarily don't need to do the conversions, but go listen to that first, before you just embark on assuming that you need to do Roth conversions.
00:06:38.110 --> 00:06:38.440
All right.
00:06:38.951 --> 00:06:41.560
So let's say you got$2 million sitting in an IRA.
00:06:42.940 --> 00:06:45.430
And let's say it's earning something.
00:06:45.430 --> 00:06:47.620
You've got to invest in whatever you have it invested in.
00:06:47.620 --> 00:06:47.891
It's in.
00:06:48.341 --> 00:06:52.360
Real estate it's in stocks, mutual funds, ETFs bonds, CDs.
00:06:52.391 --> 00:06:54.310
I don't care, whatever it is, but let's assume.
00:06:54.790 --> 00:07:00.490
For purposes of illustration here that you're earning about a 5% rate of return on that$2 million.
00:07:01.240 --> 00:07:02.110
Simple math.
00:07:03.730 --> 00:07:07.091
$2 million at a 5% growth rate is on average.
00:07:07.211 --> 00:07:09.641
A hundred thousand dollars a year in growth.
00:07:10.961 --> 00:07:15.011
Well, if your taxable income is like 80,000 bucks.
00:07:15.790 --> 00:07:19.721
Thank you, social security minus your deductions.
00:07:19.750 --> 00:07:21.430
And let's say you're at$80,000.
00:07:21.461 --> 00:07:24.581
That's that solidly in the 22% tax bracket.
00:07:25.420 --> 00:07:31.781
Well, in order to get to the top of that bracket, you can only convert about$110,000.
00:07:31.781 --> 00:07:37.540
There's some change on there, but I'll let you look at the document to see what all the numbers are, but remember.
00:07:38.350 --> 00:07:41.831
You have to begin these conversions with the end in mind.
00:07:42.401 --> 00:07:43.781
So, what are you trying to accomplish?
00:07:43.841 --> 00:07:44.440
Remember?
00:07:44.920 --> 00:07:50.920
You're trying to get that balance down dramatically lower so that the resulting required minimum distributions.
00:07:50.920 --> 00:07:53.531
I don't just bury you with this taxable income.
00:07:53.531 --> 00:07:53.951
That's going to.
00:07:54.641 --> 00:08:00.011
They lose your life in these form of required minimum distributions.
00:08:00.730 --> 00:08:05.620
So if you're at 80,000 of taxable income and you can only convert 110,000.
00:08:06.341 --> 00:08:12.281
That sounds like a lot, which when you start doing the math on what the text is going to be on, that you think you're doing a great job with it.
00:08:12.730 --> 00:08:19.391
But if your balance grows by a hundred thousand a year, And you can only convert 110.
00:08:19.781 --> 00:08:22.990
And if the goal is to reduce the balance, what have you gained?
00:08:24.071 --> 00:08:24.461
What else?
00:08:25.271 --> 00:08:27.130
My dear listener, you have gained nothing.
00:08:27.521 --> 00:08:30.641
You've gone through an exercise in futility of just treading water.
00:08:30.670 --> 00:08:32.890
You have not solved your problem.
00:08:33.520 --> 00:08:36.010
We find that a lot of people just don't.
00:08:36.760 --> 00:08:39.791
They don't get the conversions done quickly enough.
00:08:40.721 --> 00:08:47.441
So if your taxable income is a hundred thousand dollars, you're still in a 22% tax bracket.
00:08:47.801 --> 00:08:50.591
But now you can only convert$90,000.
00:08:50.860 --> 00:08:52.211
You still have the same problem.
00:08:52.211 --> 00:08:55.750
You actually hit your account and grow more than what your conversion could be.
00:08:56.770 --> 00:08:57.191
All right.
00:08:57.431 --> 00:09:02.291
All of that math is laid out in a PDF, so you can just kind of see how they work for you.
00:09:02.291 --> 00:09:02.620
Right.
00:09:03.071 --> 00:09:05.770
So let's just see what's out there to help you with this.
00:09:06.250 --> 00:09:14.740
And if that's the problem, and that's the biggest challenge, one of the biggest challenges that we see out in the Roth conversion space right now, Let's see what's out there to help you.
00:09:15.100 --> 00:09:15.821
First of all.
00:09:17.350 --> 00:09:21.760
I think it would be foolish to expect that your current relationship of yours.
00:09:22.360 --> 00:09:24.671
Whose focus is in something entirely different.
00:09:25.150 --> 00:09:27.490
It's going to be an expert on this topic for you.
00:09:28.120 --> 00:09:31.961
So do you expect your primary care doctor to be an expert in heart surgery?
00:09:32.321 --> 00:09:33.010
Of course not.
00:09:33.760 --> 00:09:38.140
Uh, do you call a residential electrician to work on an industrial plant system that you have?
00:09:38.801 --> 00:09:39.791
That'd be kind of foolish.
00:09:40.480 --> 00:09:45.520
So the challenge with the financial community is that there just aren't a lot of specialties.
00:09:46.240 --> 00:09:47.740
There aren't a lot of specialists.
00:09:48.130 --> 00:09:51.850
There are a lot of people who just enjoy doing one sliver of things.
00:09:51.850 --> 00:09:54.431
So most of the financial community.
00:09:55.811 --> 00:09:57.400
I think that they have to do all of it.
00:09:58.120 --> 00:09:59.350
And in fact, they.
00:10:00.071 --> 00:10:05.890
Thank you expect them to do it all, or you do expect that they should do it for you, but that's not what they're there for.
00:10:05.921 --> 00:10:07.331
For example, your CPA.
00:10:07.811 --> 00:10:14.110
I've got a great relationship with a CPA 35 40 years with the same CPA from the same guy.
00:10:15.760 --> 00:10:18.130
Um, but they're not financial planners.
00:10:18.581 --> 00:10:19.630
Uh, great at what they do.
00:10:19.630 --> 00:10:19.691
I.
00:10:19.931 --> 00:10:22.870
I want my guy to keep me out and paying a lot of penalties.
00:10:22.870 --> 00:10:24.071
I want him to keep me out of jail.
00:10:24.160 --> 00:10:24.490
Right.
00:10:25.331 --> 00:10:31.510
But then they're not longterm tax planners and most don't hold yourself out as financial planners.
00:10:33.791 --> 00:10:36.160
Let's say you have a financial advisor.
00:10:36.671 --> 00:10:41.500
So the question is, are they a financial planner or are they an investment guy?
00:10:41.831 --> 00:10:42.191
Right.
00:10:42.610 --> 00:10:43.000
So.
00:10:44.140 --> 00:10:49.030
Whichever camp they fall in most often, if they work for a big company.
00:10:49.750 --> 00:10:54.490
Their compliance departments won't even let them offer what they call tax advice and they, and.
00:10:54.850 --> 00:10:56.591
The large companies today.
00:10:57.010 --> 00:10:58.390
Call Roth conversions.
00:10:58.931 --> 00:11:02.230
Anything other than go to the top of your tax bracket, it becomes tax advice.
00:11:02.230 --> 00:11:02.681
And.
00:11:03.431 --> 00:11:08.020
And, you know, they make their money doing other things, managing.
00:11:08.321 --> 00:11:09.311
Your investments.
00:11:09.791 --> 00:11:13.900
Or maybe even charging you a fee for big picture planning stuff.
00:11:13.931 --> 00:11:16.211
They don't normally do the other stuff.
00:11:16.211 --> 00:11:16.961
The specialties.
00:11:17.711 --> 00:11:23.831
So relying on an existing relationship that doesn't really do, this is probably not the best thing to do.
00:11:23.860 --> 00:11:29.740
That's one of the things that's out there in this whole universe of people that could help you with Roth conversions.
00:11:31.000 --> 00:11:36.280
So now let's talk about the big national investment firms, the big names I'm talking about, the ones that are all over TV.
00:11:36.701 --> 00:11:37.691
The ones that you see.
00:11:38.051 --> 00:11:41.171
All the branding, all the cute little.
00:11:42.250 --> 00:11:46.750
Um, Oh advertisements and things like that.
00:11:46.750 --> 00:11:47.081
Right.
00:11:47.711 --> 00:11:56.441
So one in particular that I can think of is going to tell their clients that they have a CPA firm that they refer them to, to do Roth conversions.
00:11:57.461 --> 00:12:03.160
Um, Well, first of all, I'll refer you back to my prior comment about what CPA is.
00:12:03.160 --> 00:12:04.030
Don't do well.
00:12:04.630 --> 00:12:11.561
And we've even had conversations through our clients with the CPA firm and this other big nationally recognized investment advisor firm.
00:12:12.010 --> 00:12:18.730
Um, and the concept of going higher tax brackets, faster conversions and more.
00:12:20.081 --> 00:12:23.230
Conversion and total is really a foreign concept to them.
00:12:25.270 --> 00:12:28.931
A lot of the other national firms just provide a real simple online calculator.
00:12:29.291 --> 00:12:30.730
You can log into your account.
00:12:30.791 --> 00:12:32.051
You can run a calculator.
00:12:32.051 --> 00:12:38.591
And on in a minute, I'll talk about what is so wrong about those calculators and we'll discuss software kind of in just a second.
00:12:39.610 --> 00:12:44.230
So we talked about the existing relationships that don't really specialize in this.
00:12:44.230 --> 00:12:51.400
We talked about the big national firms that have some really significant limitations of monitoring and managing this whole process.
00:12:51.400 --> 00:12:52.421
And then the last group.
00:12:52.811 --> 00:12:55.721
Are the people that provide software and online calculators.
00:12:56.831 --> 00:12:58.900
Um, you know, once, once you have.
00:12:59.770 --> 00:13:01.900
Gotten an, a, an accurate plan.
00:13:02.171 --> 00:13:08.260
Um, Your game plan may indicate a period with a low income tax rate.
00:13:09.341 --> 00:13:11.801
Relative to subsequent years.
00:13:13.451 --> 00:13:19.870
Um, if you have excess income, That you can pay more in income tax.
00:13:20.951 --> 00:13:23.201
You can do Roth conversions.
00:13:24.071 --> 00:13:25.600
That's what they would like you to believe.
00:13:27.010 --> 00:13:28.990
That is sounds totally logical.
00:13:29.681 --> 00:13:30.671
And it's totally wrong.
00:13:31.780 --> 00:13:41.081
I mean, um, What I'm reading to you is an excerpt that I took from an FAQ section from.
00:13:41.801 --> 00:13:45.610
A big nationally known retirement planning software that.
00:13:46.270 --> 00:13:49.301
You could go out and subscribe to and be a part of, and.
00:13:50.020 --> 00:13:51.760
You can learn a lot of different things.
00:13:52.270 --> 00:13:54.191
You know, from them to make things happen.
00:13:54.520 --> 00:13:55.331
For yourself.
00:13:56.471 --> 00:13:58.211
Um, but you know, they.
00:13:58.961 --> 00:14:03.791
Um, One of the things that they say is their tool is going to solve for.
00:14:04.240 --> 00:14:07.721
A larger estate value projection at your age.
00:14:07.931 --> 00:14:10.331
In other words, the estate value is the trigger.
00:14:10.360 --> 00:14:10.811
No.
00:14:11.260 --> 00:14:15.520
That's not, that's not the right goal and their software points you in the wrong direction.
00:14:15.941 --> 00:14:18.280
You want a larger tax adjust to the state?
00:14:19.030 --> 00:14:20.890
You want a larger estate after tax?
00:14:20.890 --> 00:14:27.160
Not just the larger estate, if, I mean, if you only look for larger, you might include assets that are still taxable to your heirs.
00:14:27.520 --> 00:14:29.921
And that gives a really faulty conclusion.
00:14:30.671 --> 00:14:34.390
Another statement that I've seen in FAQ's for this same company, is that.
00:14:34.691 --> 00:14:35.980
Annual conversions.
00:14:36.431 --> 00:14:42.071
I you state that if you use our software to do annual Roth conversions, they will not exceed.
00:14:42.791 --> 00:14:45.041
Your plans, average effective tax rate.
00:14:45.941 --> 00:14:49.150
Well, that's also totally contrary to what we see proven.
00:14:49.870 --> 00:14:52.091
Incorrect every single day of the week.
00:14:52.600 --> 00:15:00.221
You have to get to higher tax rates than you currently are in Oregon to reduce your balances and the overwhelming majority of the time.
00:15:00.221 --> 00:15:03.160
If you are what I call a consummate IRA millionaire.
00:15:03.821 --> 00:15:10.811
So, and then they talk about if you don't have enough funds in after tax accounts to cover the tax liability.
00:15:11.441 --> 00:15:19.931
That you don't want to do conversions well, So that means nobody can convert unless they have a lot of after tax assets.
00:15:20.350 --> 00:15:26.681
And most of our clients are people maybe like you who say pretty exclusively within a 401k most of your life.
00:15:29.110 --> 00:15:30.341
Another statement that I make.
00:15:30.341 --> 00:15:35.291
And I'm just kinda going through these because these are not, they're not new to this one company.
00:15:35.291 --> 00:15:43.331
It's just what I see in all the software that's out there is all these limitations and all these paradigms that they set in place.
00:15:44.081 --> 00:15:44.561
That.
00:15:45.551 --> 00:15:46.360
Serve.
00:15:47.110 --> 00:15:51.221
Uh, developer well in creating an easy tool that somebody can use.
00:15:51.610 --> 00:15:54.100
But they don't create an optimal outcome.
00:15:54.850 --> 00:15:59.860
So they also, they also have written into their FAQ.
00:16:00.280 --> 00:16:07.691
That, um, they'll use recently converted funds to pay taxes first, which has really a bad idea.
00:16:07.780 --> 00:16:14.620
It it, I mean, once you paid taxes, that'd becomes like gold in the bank that you don't want to spend for as long as you possibly could.
00:16:16.211 --> 00:16:17.831
And then they also, they don't.
00:16:18.191 --> 00:16:18.640
They're not.
00:16:19.181 --> 00:16:28.301
Um, they're not dynamic in the tax rates, meaning they don't include, what's already written into the tax code about the tax cuts job act.
00:16:28.691 --> 00:16:30.701
That sunsets and goes away.
00:16:31.091 --> 00:16:33.581
At the beginning of 2026.
00:16:34.120 --> 00:16:34.451
Right.
00:16:34.750 --> 00:16:35.291
So.
00:16:36.941 --> 00:16:40.390
You know, there's just a lot of things that are wrong with most of the software.
00:16:40.390 --> 00:16:44.561
And I would just warn you about using commercially available.
00:16:45.010 --> 00:16:47.410
Calculators and do it yourself widgets.
00:16:47.441 --> 00:16:52.301
Cause they, I mean, that's the reason I've invested hundreds of thousands of dollars in software.
00:16:52.811 --> 00:16:55.870
Is to be able to make sure that we come to the right conclusion.
00:16:56.260 --> 00:16:59.140
You just have to be careful when you're looking at some of these tools.
00:16:59.140 --> 00:17:09.790
And that's really, my message is when you're looking at these tools, You have to read the fine print and you have to be savvy enough to understand why those really are the wrong.
00:17:10.211 --> 00:17:12.461
Set of constraints that you're really looking at.
00:17:12.881 --> 00:17:13.330
So.
00:17:13.990 --> 00:17:21.941
Let me, let me review kind of the objectives for you so you can properly evaluate what your opportunity for a big tax saving is through conversions.
00:17:21.941 --> 00:17:22.631
Number one.
00:17:23.020 --> 00:17:26.590
I remember I said, you have to define the sexist successful conver.
00:17:27.371 --> 00:17:28.391
Roth conversion.
00:17:28.931 --> 00:17:31.330
And that means you avoid the most tax possible.
00:17:31.750 --> 00:17:34.121
And you maximize your potential net worth.
00:17:34.361 --> 00:17:36.340
One of the things that I probably need to create.
00:17:36.881 --> 00:17:37.391
And I know.
00:17:37.721 --> 00:17:41.921
Uh, its own podcast on is this whole concept of the time value of money.
00:17:41.921 --> 00:17:44.711
That 90% of that is really just.
00:17:45.431 --> 00:17:50.441
It's an exercise that doesn't, um, it really holds no water.
00:17:51.010 --> 00:17:56.830
And yet it sounds like it's totally logical and there is a part of that conversation that needs to take place.
00:17:56.830 --> 00:17:58.121
And we, we generate.
00:17:58.780 --> 00:17:59.411
Some of those.
00:17:59.921 --> 00:18:03.040
Present value numbers and tax adjusted numbers for people.
00:18:03.040 --> 00:18:06.340
But, um, there's a lot of that that really is overblown.
00:18:06.340 --> 00:18:13.361
But if you can also in, in this successful Roth conversions, you can also say Medicare premiums, and that's also kind of a bonus when.
00:18:14.020 --> 00:18:18.671
So the big picture on how all that's accomplished remember is that you dramatically reduce.
00:18:19.570 --> 00:18:23.800
Or totally eliminate your future requirement of distributions and an origin to that.
00:18:24.671 --> 00:18:29.711
You, you have to work on getting those pre-tax accounts as low as possible, even down to zero.
00:18:31.421 --> 00:18:32.711
So you.
00:18:33.520 --> 00:18:39.971
You have to find that optimal plan and anything short of it is really just an exercise and you've missed the mark.
00:18:40.451 --> 00:18:47.441
And you, maybe you're going to be leaving a lot of money on the table and you never really knew it because you didn't, nobody ever really showed you the math behind what was possible.
00:18:47.951 --> 00:18:48.401
So.
00:18:49.780 --> 00:18:51.431
There are a lot of alternatives.
00:18:51.461 --> 00:18:53.320
There are a lot of options that are available.
00:18:53.560 --> 00:18:58.240
I just wanted to real quickly just kind of shed some light on the challenges with some of those.
00:18:58.540 --> 00:19:00.611
If you can find somebody that specializes in it.
00:19:00.641 --> 00:19:02.020
And I don't mean just marketing.
00:19:02.351 --> 00:19:03.820
But they can prove to you.
00:19:04.181 --> 00:19:09.490
That they're doing the math on each of the different scenarios and there, and, and it's what they do.
00:19:10.121 --> 00:19:10.510
I don't.
00:19:10.540 --> 00:19:13.480
I mean, we obviously don't sell products and don't.
00:19:13.990 --> 00:19:15.520
Um, manage investment assets.
00:19:15.520 --> 00:19:22.121
And that's just out of my own decision that I didn't want any potential conflict of interest to come into your mind of.
00:19:22.121 --> 00:19:25.631
Why would I be not recommending something or recommending something?
00:19:25.871 --> 00:19:28.391
And you can find somebody that you trust that.
00:19:28.721 --> 00:19:36.671
Can demonstrate that they're, that they're doing the math and they can prove to you what your savings is going to be or not be under a variety of scenarios, then go for it.
00:19:36.701 --> 00:19:43.931
But I want to leave you with this in order to get the Roth conversion drive as just another restatement, you simply have to convert.
00:19:44.381 --> 00:19:45.280
More than you think.
00:19:46.151 --> 00:19:47.290
Faster than you think.
00:19:47.740 --> 00:19:54.820
And in the higher tax bracket than you're probably comfortable with before you get to see what the real numbers are on your own scenario.
00:19:55.421 --> 00:20:02.020
So, you know, what's the next after you've accumulated a large amount of pre-tax assets is figuring the most tax efficient way.
00:20:02.861 --> 00:20:05.111
To distribute those over your lifetime.
00:20:05.711 --> 00:20:06.941
What happens next?
00:20:07.030 --> 00:20:10.391
When you get ready to retire is you have to develop an income.
00:20:11.020 --> 00:20:12.371
Distribution plan.
00:20:13.000 --> 00:20:16.990
That uses your assets as they have been developed.
00:20:16.990 --> 00:20:21.310
And of course, if you're still several years away from retirement, And you're still saving money.
00:20:21.911 --> 00:20:25.810
And there's a totally different strategy that goes into doing the conversion.
00:20:25.810 --> 00:20:27.161
So what's next for you?
00:20:27.520 --> 00:20:28.721
Is a different conversation.
00:20:29.141 --> 00:20:30.431
So I hope this has been helpful.
00:20:30.851 --> 00:20:33.040
Uh, keep in touch with the podcast.
00:20:33.250 --> 00:20:39.971
Um, schedule, if this kind of information is sometimes interesting to you and you like kind of something a little bit.
00:20:40.721 --> 00:20:46.121
Uh, lighter hearted and more application focused, then subscribe to the podcast.
00:20:46.510 --> 00:20:52.661
And you'll be notified when, uh, when we push another one out there and love to have you join the ranks of what we're doing.
00:20:52.721 --> 00:20:55.631
Check out our website@craigweir.com.
00:20:55.661 --> 00:21:01.661
There's lots of free resources and things that you can kind of plug into@craigwer.com.
00:21:02.020 --> 00:21:07.510
And remember that helped a little handout that I've created for you to be attached to the show notes on the show.
00:21:08.951 --> 00:21:13.121
Thanks for taking your time with me today and enjoyed it and I'll join you on the next podcast
00:00:42.371 --> 00:00:42.850
Hi there.
00:00:42.850 --> 00:00:43.481
This is Craig.
00:00:43.481 --> 00:00:43.691
We are.
00:00:43.750 --> 00:00:44.831
Welcome back to another.
00:00:45.670 --> 00:00:47.831
What's next in retirement podcast.
00:00:48.521 --> 00:00:53.381
You know, we've got a kind of an interesting subject matter that I wanted to kind of run through with you today.
00:00:53.951 --> 00:00:59.381
I, uh, I get a lot of questions from a lot of other folks and our advisors do as well.
00:01:00.070 --> 00:01:00.790
Just asking.
00:01:00.850 --> 00:01:05.831
You know, what's so different about what you guys do, then what everybody else is doing.
00:01:06.820 --> 00:01:12.370
Um, a lot of people wonder, gosh, why, why not just do what my CPA is telling me to do or pay?
00:01:12.370 --> 00:01:14.740
I've got a financial advisor they're giving me advice there.
00:01:15.131 --> 00:01:16.781
They've been helping me for 20 years.
00:01:16.781 --> 00:01:21.911
So, uh, why would I do what's so different that you're talking about when I just listened to them.
00:01:23.441 --> 00:01:32.950
Or, you know, a lot of people, um, you know, they'll call and they'll talk about software that's available and the differences of what we do.
00:01:32.950 --> 00:01:34.061
And what's out there.
00:01:34.510 --> 00:01:37.240
What's uh, what I mean, there's just a lot of questions.
00:01:37.240 --> 00:01:37.631
Okay.
00:01:37.661 --> 00:01:39.790
That's kind of what this podcast is all about.
00:01:39.790 --> 00:01:43.990
This whole episode is, is all about what is so unique.
00:01:44.501 --> 00:01:48.581
Um, in the Roth conversion space and more importantly, what.
00:01:49.150 --> 00:01:56.141
What are the options that are available to somebody to actually kind of pursue down this Roth conversion?
00:01:56.740 --> 00:01:57.430
Uh, path.
00:01:57.971 --> 00:02:03.191
So that's what I want to do this for the next, I don't know, 20, 30 minutes, however long we're going to take to do that.
00:02:03.281 --> 00:02:12.431
What I want to, I want to just kind of go through what's out there in the whole Roth conversion assistance universe, the different things that you could avail yourself up.
00:02:13.001 --> 00:02:15.820
And will it give you an optimal outcome?
00:02:16.570 --> 00:02:22.330
Um, I want to, first of all, though, let's kind of start with, you know, what's a successful Ross conversion.
00:02:22.901 --> 00:02:23.441
Remember.
00:02:24.131 --> 00:02:27.461
These episodes are really all about trying to help you.
00:02:27.971 --> 00:02:31.751
With the what's next in life, whatever that next step is.
00:02:31.751 --> 00:02:37.751
So you've accumulated the big IRA or 401k, and you're trying to figure out what do I do with it?
00:02:37.751 --> 00:02:38.230
So that's all.
00:02:38.230 --> 00:02:39.251
What, that's the next step?
00:02:39.281 --> 00:02:41.020
You're trying to get retired.
00:02:41.050 --> 00:02:42.131
And not sure.
00:02:42.131 --> 00:02:43.390
What should your next steps be?
00:02:43.450 --> 00:02:45.670
Well, that's what we do episodes on you.
00:02:46.121 --> 00:02:50.531
Maybe you're tired of your investment advisor and not sure whether you got the right thing.
00:02:50.531 --> 00:02:52.540
Well, We've got episodes coming up with that.
00:02:52.540 --> 00:02:54.881
So there's just, there's just a lot that's out there.
00:02:54.881 --> 00:03:06.670
But when we, when we focus in today, But we're really talking about is defining a successful Roth conversion and analyzing the different options that are available for you to kind of pick what you're going to do.
00:03:07.631 --> 00:03:08.140
So.
00:03:09.221 --> 00:03:11.711
Let's start with a successful Roth conversion.
00:03:11.890 --> 00:03:13.300
First of all, you want to avoid.
00:03:13.901 --> 00:03:16.691
The absolute most tax you possibly can.
00:03:17.621 --> 00:03:21.251
That will also maximize your potential net worth.
00:03:21.311 --> 00:03:26.200
And if you can also say Medicare premiums, well, that's a bonus, right?
00:03:51.131 --> 00:03:51.251
Yeah.
00:03:51.251 --> 00:03:54.221
So the big picture of how all that gets accomplished.
00:03:54.730 --> 00:04:04.091
Is that you really have to dramatically reduce or totally eliminate your future required minimum distributions or your RMDs.
00:04:04.480 --> 00:04:12.881
And to do that, you have to work on getting the pre-tax accounts as low as possible, even to$0 at some point.
00:04:13.991 --> 00:04:17.321
Potentially, not everybody, but that's, that's the real target.
00:04:17.680 --> 00:04:21.610
That's how you get this big picture of an optimal Roth conversion.
00:04:22.661 --> 00:04:24.940
Game plan put in place and anything shorter.
00:04:25.000 --> 00:04:28.120
This is really, it's just a plan, but it's not optimal.
00:04:28.300 --> 00:04:31.060
And it's possible that you could also waste.
00:04:31.360 --> 00:04:33.880
A ton of tax money without even really knowing it.
00:04:34.540 --> 00:04:38.021
So you, it's kind of like you did good by converting.
00:04:38.560 --> 00:04:39.670
So what's the harm.
00:04:40.091 --> 00:04:52.781
But the actual harm is that you really didn't read and realize that you were leaving a lot of money on the table, or in a lot of instances, you were paying more Medicare than you needed to, to get the same thing accomplished or even more tax than what you needed to.
00:04:53.380 --> 00:04:57.341
You know, a lot of people, we find that stay in the lower tax brackets and do their conversions.
00:04:57.730 --> 00:05:06.310
At the time you add it all up or where their lifetime, they actually spend more money in income tax than if they would have just really gotten after it and gotten to more of an accelerated.
00:05:06.940 --> 00:05:09.581
Position to get the higher tax brackets to get it done.
00:05:10.091 --> 00:05:13.271
So look, you're simply going to have to convert more than you think.
00:05:14.531 --> 00:05:15.850
Faster than you think.
00:05:16.360 --> 00:05:20.141
And at a higher tax bracket than you're probably comfortable with right now.
00:05:20.651 --> 00:05:22.451
In order to hit the optimal number.
00:05:23.920 --> 00:05:25.091
So I'm going to run through.
00:05:25.690 --> 00:05:28.120
Um, kind of a scenario with you that.
00:05:28.661 --> 00:05:33.821
Um, if you're listening to this podcast, it may be difficult to follow the math.
00:05:34.271 --> 00:05:35.771
Um, by just listening to it.
00:05:35.771 --> 00:05:43.420
And so in the show notes, we're going to put a link to a PDF document that will have just kind of the raw basics of what I'm sharing with you here.
00:05:43.420 --> 00:05:43.781
Right?
00:05:44.050 --> 00:05:49.331
So I want to run through an income tax bracket illustration from you that I do in a lot of the webinars.
00:05:49.690 --> 00:05:53.771
To kind of illustrate the point that you have to do this a lot faster than what you think.
00:05:54.461 --> 00:06:00.130
So, first of all, let's just, let's just talk about, let's assume that you got$2 million in IRAs.
00:06:00.461 --> 00:06:02.021
And this, this number.
00:06:02.471 --> 00:06:08.380
What I'm going to go through works, whether you got a million dollars or$5 million or 10 million sitting in your IRA.
00:06:09.071 --> 00:06:18.130
I will tell you that too, though, that I did another podcast that is totally devoted to the four situations in which you probably don't want to do.
00:06:18.790 --> 00:06:20.591
Roth conversions at all.
00:06:20.860 --> 00:06:22.240
And so I'll refer you to that.
00:06:22.240 --> 00:06:29.141
So if you've got less than a million bucks in your IRA, 401k accounts, you probably want to listen to that first.
00:06:29.440 --> 00:06:38.050
That doesn't mean that you necessarily don't need to do the conversions, but go listen to that first, before you just embark on assuming that you need to do Roth conversions.
00:06:38.110 --> 00:06:38.440
All right.
00:06:38.951 --> 00:06:41.560
So let's say you got$2 million sitting in an IRA.
00:06:42.940 --> 00:06:45.430
And let's say it's earning something.
00:06:45.430 --> 00:06:47.620
You've got to invest in whatever you have it invested in.
00:06:47.620 --> 00:06:47.891
It's in.
00:06:48.341 --> 00:06:52.360
Real estate it's in stocks, mutual funds, ETFs bonds, CDs.
00:06:52.391 --> 00:06:54.310
I don't care, whatever it is, but let's assume.
00:06:54.790 --> 00:07:00.490
For purposes of illustration here that you're earning about a 5% rate of return on that$2 million.
00:07:01.240 --> 00:07:02.110
Simple math.
00:07:03.730 --> 00:07:07.091
$2 million at a 5% growth rate is on average.
00:07:07.211 --> 00:07:09.641
A hundred thousand dollars a year in growth.
00:07:10.961 --> 00:07:15.011
Well, if your taxable income is like 80,000 bucks.
00:07:15.790 --> 00:07:19.721
Thank you, social security minus your deductions.
00:07:19.750 --> 00:07:21.430
And let's say you're at$80,000.
00:07:21.461 --> 00:07:24.581
That's that solidly in the 22% tax bracket.
00:07:25.420 --> 00:07:31.781
Well, in order to get to the top of that bracket, you can only convert about$110,000.
00:07:31.781 --> 00:07:37.540
There's some change on there, but I'll let you look at the document to see what all the numbers are, but remember.
00:07:38.350 --> 00:07:41.831
You have to begin these conversions with the end in mind.
00:07:42.401 --> 00:07:43.781
So, what are you trying to accomplish?
00:07:43.841 --> 00:07:44.440
Remember?
00:07:44.920 --> 00:07:50.920
You're trying to get that balance down dramatically lower so that the resulting required minimum distributions.
00:07:50.920 --> 00:07:53.531
I don't just bury you with this taxable income.
00:07:53.531 --> 00:07:53.951
That's going to.
00:07:54.641 --> 00:08:00.011
They lose your life in these form of required minimum distributions.
00:08:00.730 --> 00:08:05.620
So if you're at 80,000 of taxable income and you can only convert 110,000.
00:08:06.341 --> 00:08:12.281
That sounds like a lot, which when you start doing the math on what the text is going to be on, that you think you're doing a great job with it.
00:08:12.730 --> 00:08:19.391
But if your balance grows by a hundred thousand a year, And you can only convert 110.
00:08:19.781 --> 00:08:22.990
And if the goal is to reduce the balance, what have you gained?
00:08:24.071 --> 00:08:24.461
What else?
00:08:25.271 --> 00:08:27.130
My dear listener, you have gained nothing.
00:08:27.521 --> 00:08:30.641
You've gone through an exercise in futility of just treading water.
00:08:30.670 --> 00:08:32.890
You have not solved your problem.
00:08:33.520 --> 00:08:36.010
We find that a lot of people just don't.
00:08:36.760 --> 00:08:39.791
They don't get the conversions done quickly enough.
00:08:40.721 --> 00:08:47.441
So if your taxable income is a hundred thousand dollars, you're still in a 22% tax bracket.
00:08:47.801 --> 00:08:50.591
But now you can only convert$90,000.
00:08:50.860 --> 00:08:52.211
You still have the same problem.
00:08:52.211 --> 00:08:55.750
You actually hit your account and grow more than what your conversion could be.
00:08:56.770 --> 00:08:57.191
All right.
00:08:57.431 --> 00:09:02.291
All of that math is laid out in a PDF, so you can just kind of see how they work for you.
00:09:02.291 --> 00:09:02.620
Right.
00:09:03.071 --> 00:09:05.770
So let's just see what's out there to help you with this.
00:09:06.250 --> 00:09:14.740
And if that's the problem, and that's the biggest challenge, one of the biggest challenges that we see out in the Roth conversion space right now, Let's see what's out there to help you.
00:09:15.100 --> 00:09:15.821
First of all.
00:09:17.350 --> 00:09:21.760
I think it would be foolish to expect that your current relationship of yours.
00:09:22.360 --> 00:09:24.671
Whose focus is in something entirely different.
00:09:25.150 --> 00:09:27.490
It's going to be an expert on this topic for you.
00:09:28.120 --> 00:09:31.961
So do you expect your primary care doctor to be an expert in heart surgery?
00:09:32.321 --> 00:09:33.010
Of course not.
00:09:33.760 --> 00:09:38.140
Uh, do you call a residential electrician to work on an industrial plant system that you have?
00:09:38.801 --> 00:09:39.791
That'd be kind of foolish.
00:09:40.480 --> 00:09:45.520
So the challenge with the financial community is that there just aren't a lot of specialties.
00:09:46.240 --> 00:09:47.740
There aren't a lot of specialists.
00:09:48.130 --> 00:09:51.850
There are a lot of people who just enjoy doing one sliver of things.
00:09:51.850 --> 00:09:54.431
So most of the financial community.
00:09:55.811 --> 00:09:57.400
I think that they have to do all of it.
00:09:58.120 --> 00:09:59.350
And in fact, they.
00:10:00.071 --> 00:10:05.890
Thank you expect them to do it all, or you do expect that they should do it for you, but that's not what they're there for.
00:10:05.921 --> 00:10:07.331
For example, your CPA.
00:10:07.811 --> 00:10:14.110
I've got a great relationship with a CPA 35 40 years with the same CPA from the same guy.
00:10:15.760 --> 00:10:18.130
Um, but they're not financial planners.
00:10:18.581 --> 00:10:19.630
Uh, great at what they do.
00:10:19.630 --> 00:10:19.691
I.
00:10:19.931 --> 00:10:22.870
I want my guy to keep me out and paying a lot of penalties.
00:10:22.870 --> 00:10:24.071
I want him to keep me out of jail.
00:10:24.160 --> 00:10:24.490
Right.
00:10:25.331 --> 00:10:31.510
But then they're not longterm tax planners and most don't hold yourself out as financial planners.
00:10:33.791 --> 00:10:36.160
Let's say you have a financial advisor.
00:10:36.671 --> 00:10:41.500
So the question is, are they a financial planner or are they an investment guy?
00:10:41.831 --> 00:10:42.191
Right.
00:10:42.610 --> 00:10:43.000
So.
00:10:44.140 --> 00:10:49.030
Whichever camp they fall in most often, if they work for a big company.
00:10:49.750 --> 00:10:54.490
Their compliance departments won't even let them offer what they call tax advice and they, and.
00:10:54.850 --> 00:10:56.591
The large companies today.
00:10:57.010 --> 00:10:58.390
Call Roth conversions.
00:10:58.931 --> 00:11:02.230
Anything other than go to the top of your tax bracket, it becomes tax advice.
00:11:02.230 --> 00:11:02.681
And.
00:11:03.431 --> 00:11:08.020
And, you know, they make their money doing other things, managing.
00:11:08.321 --> 00:11:09.311
Your investments.
00:11:09.791 --> 00:11:13.900
Or maybe even charging you a fee for big picture planning stuff.
00:11:13.931 --> 00:11:16.211
They don't normally do the other stuff.
00:11:16.211 --> 00:11:16.961
The specialties.
00:11:17.711 --> 00:11:23.831
So relying on an existing relationship that doesn't really do, this is probably not the best thing to do.
00:11:23.860 --> 00:11:29.740
That's one of the things that's out there in this whole universe of people that could help you with Roth conversions.
00:11:31.000 --> 00:11:36.280
So now let's talk about the big national investment firms, the big names I'm talking about, the ones that are all over TV.
00:11:36.701 --> 00:11:37.691
The ones that you see.
00:11:38.051 --> 00:11:41.171
All the branding, all the cute little.
00:11:42.250 --> 00:11:46.750
Um, Oh advertisements and things like that.
00:11:46.750 --> 00:11:47.081
Right.
00:11:47.711 --> 00:11:56.441
So one in particular that I can think of is going to tell their clients that they have a CPA firm that they refer them to, to do Roth conversions.
00:11:57.461 --> 00:12:03.160
Um, Well, first of all, I'll refer you back to my prior comment about what CPA is.
00:12:03.160 --> 00:12:04.030
Don't do well.
00:12:04.630 --> 00:12:11.561
And we've even had conversations through our clients with the CPA firm and this other big nationally recognized investment advisor firm.
00:12:12.010 --> 00:12:18.730
Um, and the concept of going higher tax brackets, faster conversions and more.
00:12:20.081 --> 00:12:23.230
Conversion and total is really a foreign concept to them.
00:12:25.270 --> 00:12:28.931
A lot of the other national firms just provide a real simple online calculator.
00:12:29.291 --> 00:12:30.730
You can log into your account.
00:12:30.791 --> 00:12:32.051
You can run a calculator.
00:12:32.051 --> 00:12:38.591
And on in a minute, I'll talk about what is so wrong about those calculators and we'll discuss software kind of in just a second.
00:12:39.610 --> 00:12:44.230
So we talked about the existing relationships that don't really specialize in this.
00:12:44.230 --> 00:12:51.400
We talked about the big national firms that have some really significant limitations of monitoring and managing this whole process.
00:12:51.400 --> 00:12:52.421
And then the last group.
00:12:52.811 --> 00:12:55.721
Are the people that provide software and online calculators.
00:12:56.831 --> 00:12:58.900
Um, you know, once, once you have.
00:12:59.770 --> 00:13:01.900
Gotten an, a, an accurate plan.
00:13:02.171 --> 00:13:08.260
Um, Your game plan may indicate a period with a low income tax rate.
00:13:09.341 --> 00:13:11.801
Relative to subsequent years.
00:13:13.451 --> 00:13:19.870
Um, if you have excess income, That you can pay more in income tax.
00:13:20.951 --> 00:13:23.201
You can do Roth conversions.
00:13:24.071 --> 00:13:25.600
That's what they would like you to believe.
00:13:27.010 --> 00:13:28.990
That is sounds totally logical.
00:13:29.681 --> 00:13:30.671
And it's totally wrong.
00:13:31.780 --> 00:13:41.081
I mean, um, What I'm reading to you is an excerpt that I took from an FAQ section from.
00:13:41.801 --> 00:13:45.610
A big nationally known retirement planning software that.
00:13:46.270 --> 00:13:49.301
You could go out and subscribe to and be a part of, and.
00:13:50.020 --> 00:13:51.760
You can learn a lot of different things.
00:13:52.270 --> 00:13:54.191
You know, from them to make things happen.
00:13:54.520 --> 00:13:55.331
For yourself.
00:13:56.471 --> 00:13:58.211
Um, but you know, they.
00:13:58.961 --> 00:14:03.791
Um, One of the things that they say is their tool is going to solve for.
00:14:04.240 --> 00:14:07.721
A larger estate value projection at your age.
00:14:07.931 --> 00:14:10.331
In other words, the estate value is the trigger.
00:14:10.360 --> 00:14:10.811
No.
00:14:11.260 --> 00:14:15.520
That's not, that's not the right goal and their software points you in the wrong direction.
00:14:15.941 --> 00:14:18.280
You want a larger tax adjust to the state?
00:14:19.030 --> 00:14:20.890
You want a larger estate after tax?
00:14:20.890 --> 00:14:27.160
Not just the larger estate, if, I mean, if you only look for larger, you might include assets that are still taxable to your heirs.
00:14:27.520 --> 00:14:29.921
And that gives a really faulty conclusion.
00:14:30.671 --> 00:14:34.390
Another statement that I've seen in FAQ's for this same company, is that.
00:14:34.691 --> 00:14:35.980
Annual conversions.
00:14:36.431 --> 00:14:42.071
I you state that if you use our software to do annual Roth conversions, they will not exceed.
00:14:42.791 --> 00:14:45.041
Your plans, average effective tax rate.
00:14:45.941 --> 00:14:49.150
Well, that's also totally contrary to what we see proven.
00:14:49.870 --> 00:14:52.091
Incorrect every single day of the week.
00:14:52.600 --> 00:15:00.221
You have to get to higher tax rates than you currently are in Oregon to reduce your balances and the overwhelming majority of the time.
00:15:00.221 --> 00:15:03.160
If you are what I call a consummate IRA millionaire.
00:15:03.821 --> 00:15:10.811
So, and then they talk about if you don't have enough funds in after tax accounts to cover the tax liability.
00:15:11.441 --> 00:15:19.931
That you don't want to do conversions well, So that means nobody can convert unless they have a lot of after tax assets.
00:15:20.350 --> 00:15:26.681
And most of our clients are people maybe like you who say pretty exclusively within a 401k most of your life.
00:15:29.110 --> 00:15:30.341
Another statement that I make.
00:15:30.341 --> 00:15:35.291
And I'm just kinda going through these because these are not, they're not new to this one company.
00:15:35.291 --> 00:15:43.331
It's just what I see in all the software that's out there is all these limitations and all these paradigms that they set in place.
00:15:44.081 --> 00:15:44.561
That.
00:15:45.551 --> 00:15:46.360
Serve.
00:15:47.110 --> 00:15:51.221
Uh, developer well in creating an easy tool that somebody can use.
00:15:51.610 --> 00:15:54.100
But they don't create an optimal outcome.
00:15:54.850 --> 00:15:59.860
So they also, they also have written into their FAQ.
00:16:00.280 --> 00:16:07.691
That, um, they'll use recently converted funds to pay taxes first, which has really a bad idea.
00:16:07.780 --> 00:16:14.620
It it, I mean, once you paid taxes, that'd becomes like gold in the bank that you don't want to spend for as long as you possibly could.
00:16:16.211 --> 00:16:17.831
And then they also, they don't.
00:16:18.191 --> 00:16:18.640
They're not.
00:16:19.181 --> 00:16:28.301
Um, they're not dynamic in the tax rates, meaning they don't include, what's already written into the tax code about the tax cuts job act.
00:16:28.691 --> 00:16:30.701
That sunsets and goes away.
00:16:31.091 --> 00:16:33.581
At the beginning of 2026.
00:16:34.120 --> 00:16:34.451
Right.
00:16:34.750 --> 00:16:35.291
So.
00:16:36.941 --> 00:16:40.390
You know, there's just a lot of things that are wrong with most of the software.
00:16:40.390 --> 00:16:44.561
And I would just warn you about using commercially available.
00:16:45.010 --> 00:16:47.410
Calculators and do it yourself widgets.
00:16:47.441 --> 00:16:52.301
Cause they, I mean, that's the reason I've invested hundreds of thousands of dollars in software.
00:16:52.811 --> 00:16:55.870
Is to be able to make sure that we come to the right conclusion.
00:16:56.260 --> 00:16:59.140
You just have to be careful when you're looking at some of these tools.
00:16:59.140 --> 00:17:09.790
And that's really, my message is when you're looking at these tools, You have to read the fine print and you have to be savvy enough to understand why those really are the wrong.
00:17:10.211 --> 00:17:12.461
Set of constraints that you're really looking at.
00:17:12.881 --> 00:17:13.330
So.
00:17:13.990 --> 00:17:21.941
Let me, let me review kind of the objectives for you so you can properly evaluate what your opportunity for a big tax saving is through conversions.
00:17:21.941 --> 00:17:22.631
Number one.
00:17:23.020 --> 00:17:26.590
I remember I said, you have to define the sexist successful conver.
00:17:27.371 --> 00:17:28.391
Roth conversion.
00:17:28.931 --> 00:17:31.330
And that means you avoid the most tax possible.
00:17:31.750 --> 00:17:34.121
And you maximize your potential net worth.
00:17:34.361 --> 00:17:36.340
One of the things that I probably need to create.
00:17:36.881 --> 00:17:37.391
And I know.
00:17:37.721 --> 00:17:41.921
Uh, its own podcast on is this whole concept of the time value of money.
00:17:41.921 --> 00:17:44.711
That 90% of that is really just.
00:17:45.431 --> 00:17:50.441
It's an exercise that doesn't, um, it really holds no water.
00:17:51.010 --> 00:17:56.830
And yet it sounds like it's totally logical and there is a part of that conversation that needs to take place.
00:17:56.830 --> 00:17:58.121
And we, we generate.
00:17:58.780 --> 00:17:59.411
Some of those.
00:17:59.921 --> 00:18:03.040
Present value numbers and tax adjusted numbers for people.
00:18:03.040 --> 00:18:06.340
But, um, there's a lot of that that really is overblown.
00:18:06.340 --> 00:18:13.361
But if you can also in, in this successful Roth conversions, you can also say Medicare premiums, and that's also kind of a bonus when.
00:18:14.020 --> 00:18:18.671
So the big picture on how all that's accomplished remember is that you dramatically reduce.
00:18:19.570 --> 00:18:23.800
Or totally eliminate your future requirement of distributions and an origin to that.
00:18:24.671 --> 00:18:29.711
You, you have to work on getting those pre-tax accounts as low as possible, even down to zero.
00:18:31.421 --> 00:18:32.711
So you.
00:18:33.520 --> 00:18:39.971
You have to find that optimal plan and anything short of it is really just an exercise and you've missed the mark.
00:18:40.451 --> 00:18:47.441
And you, maybe you're going to be leaving a lot of money on the table and you never really knew it because you didn't, nobody ever really showed you the math behind what was possible.
00:18:47.951 --> 00:18:48.401
So.
00:18:49.780 --> 00:18:51.431
There are a lot of alternatives.
00:18:51.461 --> 00:18:53.320
There are a lot of options that are available.
00:18:53.560 --> 00:18:58.240
I just wanted to real quickly just kind of shed some light on the challenges with some of those.
00:18:58.540 --> 00:19:00.611
If you can find somebody that specializes in it.
00:19:00.641 --> 00:19:02.020
And I don't mean just marketing.
00:19:02.351 --> 00:19:03.820
But they can prove to you.
00:19:04.181 --> 00:19:09.490
That they're doing the math on each of the different scenarios and there, and, and it's what they do.
00:19:10.121 --> 00:19:10.510
I don't.
00:19:10.540 --> 00:19:13.480
I mean, we obviously don't sell products and don't.
00:19:13.990 --> 00:19:15.520
Um, manage investment assets.
00:19:15.520 --> 00:19:22.121
And that's just out of my own decision that I didn't want any potential conflict of interest to come into your mind of.
00:19:22.121 --> 00:19:25.631
Why would I be not recommending something or recommending something?
00:19:25.871 --> 00:19:28.391
And you can find somebody that you trust that.
00:19:28.721 --> 00:19:36.671
Can demonstrate that they're, that they're doing the math and they can prove to you what your savings is going to be or not be under a variety of scenarios, then go for it.
00:19:36.701 --> 00:19:43.931
But I want to leave you with this in order to get the Roth conversion drive as just another restatement, you simply have to convert.
00:19:44.381 --> 00:19:45.280
More than you think.
00:19:46.151 --> 00:19:47.290
Faster than you think.
00:19:47.740 --> 00:19:54.820
And in the higher tax bracket than you're probably comfortable with before you get to see what the real numbers are on your own scenario.
00:19:55.421 --> 00:20:02.020
So, you know, what's the next after you've accumulated a large amount of pre-tax assets is figuring the most tax efficient way.
00:20:02.861 --> 00:20:05.111
To distribute those over your lifetime.
00:20:05.711 --> 00:20:06.941
What happens next?
00:20:07.030 --> 00:20:10.391
When you get ready to retire is you have to develop an income.
00:20:11.020 --> 00:20:12.371
Distribution plan.
00:20:13.000 --> 00:20:16.990
That uses your assets as they have been developed.
00:20:16.990 --> 00:20:21.310
And of course, if you're still several years away from retirement, And you're still saving money.
00:20:21.911 --> 00:20:25.810
And there's a totally different strategy that goes into doing the conversion.
00:20:25.810 --> 00:20:27.161
So what's next for you?
00:20:27.520 --> 00:20:28.721
Is a different conversation.
00:20:29.141 --> 00:20:30.431
So I hope this has been helpful.
00:20:30.851 --> 00:20:33.040
Uh, keep in touch with the podcast.
00:20:33.250 --> 00:20:39.971
Um, schedule, if this kind of information is sometimes interesting to you and you like kind of something a little bit.
00:20:40.721 --> 00:20:46.121
Uh, lighter hearted and more application focused, then subscribe to the podcast.
00:20:46.510 --> 00:20:52.661
And you'll be notified when, uh, when we push another one out there and love to have you join the ranks of what we're doing.
00:20:52.721 --> 00:20:55.631
Check out our website@craigweir.com.
00:20:55.661 --> 00:21:01.661
There's lots of free resources and things that you can kind of plug into@craigwer.com.
00:21:02.020 --> 00:21:07.510
And remember that helped a little handout that I've created for you to be attached to the show notes on the show.
00:21:08.951 --> 00:21:13.121
Thanks for taking your time with me today and enjoyed it and I'll join you on the next podcast
