I Tested 4 Roth Conversion Strategies on a $2M IRA for a Single Woman

WEBVTT
00:00:00.160 --> 00:00:01.840
Welcome back to Line Your Retirement.
00:00:01.919 --> 00:00:03.120
I'm Hazel Secko.
00:00:03.359 --> 00:00:07.759
Today I want to walk you through something I tested recently because the result surprised me.
00:00:07.919 --> 00:00:13.439
I ran four Roth conversion strategies on a$2 million IRA for a single woman.
00:00:13.679 --> 00:00:19.039
The one most advisors would call aggressive cost her$605,000.
00:00:19.600 --> 00:00:22.960
The one that won made her$51,000.
00:00:23.440 --> 00:00:29.519
And then I changed the one thing about her situation and the winning strategy became the losing one.
00:00:29.679 --> 00:00:34.479
If you're single or you expect to be, this is the version of the math nobody runs for you.
00:00:34.640 --> 00:00:35.920
Let's get into it.
00:00:55.200 --> 00:01:02.320
And why your best Roth conversion strategy may depend less on your own tax bill than on who gets the account after you.
00:01:02.479 --> 00:01:08.400
I'm Hazel Secko, certified financial planner, CDFA, and a fee-only fiduciary at Aligned Financial Solutions.
00:01:08.640 --> 00:01:12.239
And before we start, this is education, not personal advice.
00:01:12.400 --> 00:01:17.200
So please talk to your own tax and financial professionals before acting on any of it.
00:01:17.359 --> 00:01:22.640
And the woman in this analysis is a hypothetical composite based on situations I see regularly.
00:01:22.799 --> 00:01:37.840
If you want to see how the ideas here apply to you, start by gathering your own key numbers, your IRA balances, your current spending, your estimated social security, and an honest guess at who will inherit your account and their likely tax brackets.
00:01:38.000 --> 00:01:44.640
These are the pieces you will want to have on hand, whether you are doing on your own or bringing them to a professional.
00:01:44.799 --> 00:01:46.560
Here is what we're going to look at.
00:01:46.879 --> 00:01:52.079
For a conversion path, modeled year by year from 65 to 90.
00:01:52.319 --> 00:01:59.439
Convert everything, convert nothing, convert half, and a banded approach that converts up to a line each year.
00:01:59.680 --> 00:02:00.159
1.
00:02:00.400 --> 00:02:03.359
Why this is a different problem when you're single.
00:02:03.599 --> 00:02:07.040
Before we get to her numbers, I want you to see something.
00:02:07.280 --> 00:02:11.840
Much of the Roth conversion guidance you see is illustrated using married couples.
00:02:12.080 --> 00:02:16.159
Listen to what happens to these numbers when you file as a single person.
00:02:16.400 --> 00:02:21.360
The first Medicare surcharge starts at$218,000 for a couple.
00:02:21.520 --> 00:02:24.560
For a single filer,$109,000.
00:02:25.120 --> 00:02:31.360
That one is measured on modified adjusted gross income from the tax return you filed two years earlier.
00:02:31.599 --> 00:02:37.360
The 22% bracket ends at$211,400 for a couple.
00:02:37.520 --> 00:02:40.800
For single filer,$105,700.
00:02:41.360 --> 00:02:45.759
That one is measured on taxable income after your deductions come off.
00:02:46.080 --> 00:02:51.039
The net investment income tax starts at$250,000 for a couple.
00:02:51.280 --> 00:02:53.120
For you,$200,000.
00:02:53.520 --> 00:02:59.360
Modified adjusted gross income again, and that line has not moved since 2013.
00:02:59.599 --> 00:03:03.759
And there's an enhanced deduction for people 65 and older.
00:03:03.919 --> 00:03:15.520
For a married couple where both spouses qualify, the$12,000 deduction starts phasing out at$150,000 of modified adjusted gross income and is gone at$250,000.
00:03:16.080 --> 00:03:24.159
For single filers, the$6,000 deduction phases out between$75,000 and$175,000.
00:03:24.719 --> 00:03:29.840
There are three different ways income is measured and four separate thresholds to track.
00:03:30.080 --> 00:03:35.199
Most single filer limits are set at around half the thresholds used for couples.
00:03:35.280 --> 00:03:40.319
So while the advice isn't exactly wrong, it's designed for people who have double the flexibility.
00:03:40.479 --> 00:03:44.080
It's the right idea, but the scale is off by about half.
00:03:44.400 --> 00:03:47.680
Two, meet Joanne, let's call her Joanne.
00:03:47.840 --> 00:03:49.759
She's 65 and single.
00:03:49.919 --> 00:03:57.680
She was divorced at 52, and about half of her IRA came to her in that divorce, transferred from her ex-husband's account.
00:03:57.840 --> 00:03:59.680
A quick and important distinction here.
00:03:59.840 --> 00:04:06.319
When an IRA is divided in a divorce, the process is typically handled as a transfer incident divorce.
00:04:06.479 --> 00:04:08.719
This is not the same as quadro.
00:04:08.960 --> 00:04:15.360
Quadros are used only for employer-sponsored retirement plans like 401ks or pensions, not IRAs.
00:04:15.599 --> 00:04:28.079
For example, if you're awarded half of your ex-spouse's IRA in the divorce agreement, the money moves directly from their IRA to yours through this process, and there's no tax as long as it's done correctly.
00:04:28.240 --> 00:04:38.560
A quadro, on the other hand, stands for Qualified Domestic Relations Order, and it is used to divide employer-sponsored retirement plans like a 401 or a pension.
00:04:38.800 --> 00:04:46.639
For example, if you're awarded part of your ex-spouse's 401k, a quadro is required to tell the plan administrator to divide the account.
00:04:46.800 --> 00:05:00.639
Here is what Joanne has:$2 million in a traditional IRA,$400,000 in a taxable brokerage account, of which roughly$200,000 is unrealized gain, and$150,000 in Roth.
00:05:01.040 --> 00:05:03.759
She spends about$85,000 a year.
00:05:04.000 --> 00:05:09.600
She plans to claim Social Security at$70,000, which will be around$48,000 a year.
00:05:09.759 --> 00:05:11.120
Now the assumptions.
00:05:11.360 --> 00:05:15.279
A model is only as honest as the assumptions you can see.
00:05:15.439 --> 00:05:18.480
We run from age 65 to age 90.
00:05:18.720 --> 00:05:28.639
6% growth on the account, 2% dividend yield from the brokerage, 2.5% inflation with all tax brackets indexed, including the Medicare threshold.
00:05:28.800 --> 00:05:32.800
The bonus senior deduction expires on schedule after 2028.
00:05:32.959 --> 00:05:36.800
And for fairness, we assume Congress leaves the brackets themselves alone.
00:05:37.040 --> 00:05:50.800
We score all four strategies the same way after tax value at age 90, counting the brokerage account at its stepped-up basis and assuming her heirs pay 24% on whatever is left in the traditional IRA.
00:05:51.120 --> 00:05:55.600
Joanne was born in 1961 under secure 2.0.
00:05:55.759 --> 00:05:59.120
That means her required minimum distributions begin at 75.
00:05:59.360 --> 00:06:05.120
If you were born between 1951 and 1959, yours start at 73.
00:06:05.360 --> 00:06:06.959
Check which one applies to you.
00:06:07.199 --> 00:06:08.000
Model 1.
00:06:08.160 --> 00:06:09.199
Convert nothing.
00:06:09.439 --> 00:06:11.519
Let's start with doing nothing at all.
00:06:11.680 --> 00:06:15.920
She funds her lifestyle from the traditional IRA because it is her largest account.
00:06:16.079 --> 00:06:19.199
She never sells anything in the brokerage for 25 years.
00:06:19.439 --> 00:06:22.560
That detail is important and I'll show you why in a moment.
00:06:22.800 --> 00:06:29.360
At 65, her reported income is$85,000 and her federal tax is about$7,700.
00:06:29.680 --> 00:06:38.959
At$0,000, Social Security turns on, her income is about$100$1,000, and her tax is about$11,100.
00:06:39.199 --> 00:06:45.680
Notice that her income barely moved because the benefit replaces IRA withdrawals almost dollar for dollar.
00:06:46.079 --> 00:06:55.199
By the time she reaches$75, her IRA has grown to about$2.57 million, even though she has been spending from it for 10 years.
00:06:55.360 --> 00:07:02.800
Divide that by the IRS factor of$24.6 and her first required distribution is about$104,000.
00:07:03.199 --> 00:07:09.519
Add Social Security, where up to 85% of a benefit can become taxable depending on your provisional income.
00:07:09.759 --> 00:07:12.319
At her level, it is the full 85%.
00:07:13.040 --> 00:07:22.160
At the brokerage dividends, her modified adjusted gross income at$75 is$162,500 and her tax is$23,000.
00:07:22.480 --> 00:07:29.120
By$90, her income is$331,000 and her tax is$55,000.
00:07:29.600 --> 00:07:31.920
Now look at that number at$75 again.
00:07:32.160 --> 00:07:34.480
$162,500.
00:07:34.639 --> 00:07:40.319
The Medicare threshold by then, indexed forward for inflation, is around$139,000.
00:07:40.639 --> 00:07:41.759
She's well past it.
00:07:42.000 --> 00:07:48.639
In the plan where she does nothing at all, she is paying a Medicare surcharge every single year from$77 to$90,000.
00:07:48.959 --> 00:07:53.199
Because of the two-year look back, it is her income at$75 that triggers it.
00:07:53.439 --> 00:07:57.920
A married couple has much more room before reaching that first Medicare threshold.
00:07:58.079 --> 00:08:00.319
Same portfolio income, same strategy.
00:08:00.480 --> 00:08:02.399
The difference is the filing status.
00:08:02.560 --> 00:08:10.160
And under the no conversion strategy, her final after tax estate comes to about$5,366,000.
00:08:10.720 --> 00:08:12.879
Three constraints working against Joanne.
00:08:13.120 --> 00:08:18.800
Before I show you the conversion strategies, I want to explain why doing nothing is genuinely competitive here.
00:08:19.040 --> 00:08:23.279
The first constraint is a hidden spike in her marginal tax rate.
00:08:23.439 --> 00:08:29.519
Remember that senior deduction,$6,000 for anyone 65 and older, on top of the standard deduction.
00:08:29.680 --> 00:08:34.480
For a single filer, it starts phasing out as$75,000 of modified income.
00:08:34.720 --> 00:08:37.600
It is gone entirely by$175,000.
00:08:38.240 --> 00:08:44.080
Inside that range, she loses six cents of deduction for every extra dollar of income.
00:08:44.320 --> 00:08:49.120
So every additional dollar she converts does not raise her taxable income by$1.
00:08:49.759 --> 00:08:57.679
It raises it by$1.06, which means her real cost on that dollar is not 22%.
00:08:58.240 --> 00:09:00.799
It is closer to 23.3%.
00:09:01.679 --> 00:09:05.440
In the 24% bracket, closer to 25.4%.
00:09:06.240 --> 00:09:09.279
So why is this worse for her than for a couple?
00:09:09.519 --> 00:09:18.159
For a married couple where both spouses qualify, that phase out zone runs from$150,000 to$250,000.
00:09:18.720 --> 00:09:26.480
Their spike is actually steeper, 12% of deduction loss per dollar because each spouse loses six.
00:09:26.720 --> 00:09:33.840
But it starts at$150,000 above where most couples sit before they convert anything.
00:09:34.080 --> 00:09:38.799
Joanne's run from$75,000 to$175,000.
00:09:38.960 --> 00:09:41.440
That is not a zone she can easily avoid.
00:09:41.600 --> 00:09:47.279
That is much of the income range this particular single woman with$2 million actually lives in.
00:09:47.519 --> 00:09:52.240
She does not suddenly step into the penalty only when she converts aggressively.
00:09:52.399 --> 00:09:55.200
She's already standing in it before she starts.
00:09:55.519 --> 00:09:57.840
The second constraint is Medicare.
00:09:58.000 --> 00:10:03.200
You already know the number:$109,000 of modified adjusted gross income.
00:10:03.360 --> 00:10:05.759
And it is a cliff, not a slope.
00:10:06.000 --> 00:10:10.240
So$1 over and she pays the entire next tier for the year.
00:10:10.480 --> 00:10:16.159
The first tier costs about$1,148 a year.
00:10:16.480 --> 00:10:18.320
It climbs sharply from there.
00:10:18.559 --> 00:10:20.240
And remember, the two-year look back.
00:10:20.559 --> 00:10:24.399
Well she converts at 65% sets her premium at 67.
00:10:24.799 --> 00:10:32.000
So if you do Roth conversions, keep track of the conversion year and what it may do to your Medicare premiums two years later.
00:10:32.320 --> 00:10:35.679
The third constraint is one that often gets missed.
00:10:35.840 --> 00:10:40.399
It is the cost of selling brokerage assets to pay the tax the conversion creates.
00:10:40.720 --> 00:10:45.519
Joanne's$400,000 brokerage account holds about$200,000 of gain.
00:10:45.759 --> 00:10:50.320
Assets like that generally receive a step up in cost basis at her death.
00:10:50.559 --> 00:11:01.360
Left alone and with her surplus required distributions reinvested into it after 75, that account is worth over$2.8 million by age 90.
00:11:01.519 --> 00:11:11.039
And her heirs can receive it without paying capital gains tax on the appreciation that occurred during Joanne's lifetime, assuming the normal step-up rules apply.
00:11:11.279 --> 00:11:18.399
Any strategy that sells those shares to pay a conversion tax bill gives some of that advantage up permanently.
00:11:18.559 --> 00:11:20.960
Quick question before we get to the comparison.
00:11:21.200 --> 00:11:26.000
Has anyone ever shown you the single filer version of a retirement projection?
00:11:26.320 --> 00:11:28.720
Not the couple's version with your name on it.
00:11:29.039 --> 00:11:32.240
The actual single filer brackets and thresholds.
00:11:32.480 --> 00:11:35.919
Based on what I've seen, the answer to this is usually no.
00:11:36.159 --> 00:11:39.039
If that's been your experience, I'd like to hear it.
00:11:39.279 --> 00:11:42.639
You can reply to any of my emails and it comes straight to me.
00:11:42.960 --> 00:11:44.080
The comparison.
00:11:44.399 --> 00:11:45.360
Model 2.
00:11:45.600 --> 00:11:46.720
Convert everything.
00:11:47.200 --> 00:12:03.039
We convert everything left in the IRA over five years, about$1.66 million after her spending and tax withdrawals finishing before Social Security turns on at$70, which avoids stacking the conversion income on top of her benefit.
00:12:03.200 --> 00:12:13.120
This is the kind of aggressive conversion strategy that can look attractive when the goal is to move a large pre-tax balance into Roth as quickly as possible.
00:12:13.440 --> 00:12:16.720
At 65, she converts$400,000.
00:12:17.360 --> 00:12:25.919
Her income that year is about$446,000, and her federal tax is$111,200.
00:12:26.559 --> 00:12:30.320
To pay that bill, she has to sell out of the brokerage account.
00:12:30.480 --> 00:12:39.919
At$66, she sells nearly$200,000 of shares, which realizes about$100,000 of gain on top of the next conversion.
00:12:40.080 --> 00:12:42.960
Her tax that year is$130,000.
00:12:43.519 --> 00:12:45.600
At 67, it gets worse.
00:12:45.759 --> 00:12:52.639
The brokerage account runs dry that year and she has to pull from the IRA to pay the tax on the conversion itself.
00:12:52.799 --> 00:12:56.559
Her income that year is$582,000.
00:12:57.120 --> 00:13:00.639
Her tax is$150,500.
00:13:00.799 --> 00:13:05.200
And the year after that is higher still,$160,800.
00:13:05.759 --> 00:13:10.639
Across those five years, she pays$632,000 in federal tax.
00:13:11.039 --> 00:13:12.559
After that, it looks wonderful.
00:13:12.799 --> 00:13:14.960
21 years of almost no tax at all.
00:13:15.279 --> 00:13:19.519
Final score:$4.761 million.
00:13:20.080 --> 00:13:22.639
$4,761,000.
00:13:23.120 --> 00:13:27.200
That is$605,000 worse than doing nothing.
00:13:27.519 --> 00:13:29.519
More than 11% worse.
00:13:29.840 --> 00:13:30.799
Model 3.
00:13:31.039 --> 00:13:32.159
Convert half.
00:13:32.399 --> 00:13:35.200
$200,000 a year for five years.
00:13:35.440 --> 00:13:38.799
Gentler, smarter looking, and it still loses.
00:13:53.919 --> 00:14:01.840
Each year from 65 through 74, she converts only the amount that brings her income up to just under the Medicare line.
00:14:02.080 --> 00:14:10.399
One detail matters here, her living expenses and her tax bills still come out of the IRA exactly as in Model 1.
00:14:10.559 --> 00:14:16.639
Those withdrawals already use up most of the room under the line, so the conversions themselves are small.
00:14:16.799 --> 00:14:22.799
If you see a plan with much bigger banded conversions, ask where the spending money is coming from.
00:14:23.039 --> 00:14:28.000
Paying the bills from a Roth and converting more produces the exact same tax result.
00:14:28.240 --> 00:14:31.360
It only changes what the word conversion means.
00:14:31.600 --> 00:14:33.759
And notice what she cannot do.
00:14:33.919 --> 00:14:43.919
A couple can run a first phase of conversions up to the point where the senior deduction starts phasing out,$150,000, and only then worry about Medicare.
00:14:44.240 --> 00:14:50.240
Joanne's phase out starts at$75,000 below where her income already sits.
00:14:50.559 --> 00:14:53.519
So for her, there is no first phase.
00:14:53.759 --> 00:14:56.159
The Medicare line is the only line.
00:14:56.480 --> 00:14:59.600
At$65, that is$28,000.
00:15:00.240 --> 00:15:03.120
At$66, about$15,000.
00:15:03.519 --> 00:15:09.039
When Social Security turns on at$70,000, the benefit replaces IRA withdrawals.
00:15:09.120 --> 00:15:17.200
So the room under the line stays about the same, roughly$23,000 to$25,000 year through$74.
00:15:17.440 --> 00:15:21.360
Across the whole decade, she converts$208,000.
00:15:21.840 --> 00:15:24.240
That is about a tenth of the balance.
00:15:24.559 --> 00:15:28.639
Final score,$5,417,000.
00:15:29.120 --> 00:15:32.480
It comes out ahead by$50,900.
00:15:33.120 --> 00:15:36.559
So what does that$51,000 actually mean?
00:15:36.799 --> 00:15:42.320
$51,000 on a$5.4 million estate is less than 1%.
00:15:42.879 --> 00:15:45.519
So realistically, that is almost a tie.
00:15:45.679 --> 00:15:47.600
And that tells us something important.
00:15:47.840 --> 00:15:54.720
A married couple often has more room to make Roth conversions before running into higher brackets or Medicare surcharges.
00:15:54.960 --> 00:15:56.080
Joanne does not.
00:15:56.240 --> 00:16:02.080
As a single filer, she's already much closer to those limits before she converts anything.
00:16:02.320 --> 00:16:09.919
Run this same bandit strategy for a married couple with the same$2 million and it converts over$800,000.
00:16:10.480 --> 00:16:15.360
Joanne converts$208,000, a quarter of the room.
00:16:15.519 --> 00:16:23.039
That leaves very little room to convert enough to make a meaningful difference without creating another tax cost or triggering Medicare surcharge.
00:16:23.200 --> 00:16:30.799
So if the question is whether converting will make her meaningfully richer under these assumptions, probably not.
00:16:31.039 --> 00:16:32.960
But that is not actually the question.
00:16:33.200 --> 00:16:35.360
The input that changes everything.
00:16:35.600 --> 00:16:39.279
I ran the analysis again and changed just one assumption.
00:16:39.600 --> 00:16:43.840
Who inherits the IRA and what tax bracket they are in?
00:16:44.000 --> 00:16:52.399
If the IRA goes to charity, a church, a donor advice fund, anyone who pays no tax, doing nothing wins by about$33,000.
00:16:53.120 --> 00:16:58.879
Every dollar she converted was tax paid on money that was never going to be taxed.
00:16:59.039 --> 00:17:05.599
If her heirs are in their 12% bracket, the bandit strategy wins by just$9,000.
00:17:06.160 --> 00:17:07.440
A rounding error.
00:17:07.680 --> 00:17:08.880
Call that a tie.
00:17:09.200 --> 00:17:12.640
At 22%, it wins by$44,000.
00:17:13.039 --> 00:17:17.119
At 24%, which is what we modeled,$51,000.
00:17:17.599 --> 00:17:22.319
At 32%, the bandit strategy wins by$78,800.
00:17:22.799 --> 00:17:26.480
At 37%, it wins by$96,200.
00:17:27.119 --> 00:17:35.119
Everything else stayed the same, and the strategy went from a$33,000 mistake to a$96,000 win.
00:17:35.359 --> 00:17:40.079
Whether this is worth doing at all depends on a number that has nothing to do with her.
00:17:40.240 --> 00:17:45.119
And here's why that has different implications for a woman who is already single.
00:17:45.359 --> 00:17:49.680
For a married couple, one major reason to convert is the survivor.
00:17:49.920 --> 00:17:51.839
One of them may outlive the other.
00:17:52.000 --> 00:17:59.119
The survivor goes from filing jointly to filing single with much narrow break, gets a lower threshold.
00:17:59.519 --> 00:18:03.839
Conversions can serve as insurance against that future tax compression.
00:18:04.079 --> 00:18:07.519
It is a strong argument, and I have a whole episode on it.
00:18:07.759 --> 00:18:09.680
Joanne does not get that argument.
00:18:09.920 --> 00:18:11.759
She's already filing single.
00:18:11.920 --> 00:18:13.599
She has been the entire time.
00:18:13.839 --> 00:18:20.880
There is no survivor event coming that moves her from joint brackets to single ones because she's already there.
00:18:21.119 --> 00:18:31.200
Those lines will drift up slowly with inflation, and Congress can change anything it wants, but nothing in her own filing status is going to widen them suddenly.
00:18:31.440 --> 00:18:37.599
So one of our biggest reasons to convert may not be about her own lifetime tax bill at all.
00:18:37.759 --> 00:18:40.480
It may be about who gets the IRA next.
00:18:40.720 --> 00:18:45.920
Whatever is left in the IRA goes to her children or her nieces or whoever she names.
00:18:46.160 --> 00:18:53.920
Under the Secure Act passed in 2019, most non-Spouse beneficiaries have 10 years to empty it.
00:18:54.079 --> 00:19:02.400
And because Joanne would have died after her required beginning date, many of them also have to take something out every single year along the way.
00:19:02.640 --> 00:19:14.160
Some beneficiaries are treated differently, a surviving spouse, her own minor child until age 21, someone disabled, chronically ill, or someone not more than 10 years younger than her.
00:19:14.400 --> 00:19:24.240
For most adult children, it is 10 years, 10 years potentially during their pick earning years at their brackets decked on top of their salaries.
00:19:24.400 --> 00:19:27.759
So ask yourself the question the model is really asking.
00:19:28.000 --> 00:19:35.440
Is your IRA going to your daughter, the teacher, your daughter, the partner at a firm, or your church?
00:19:35.599 --> 00:19:45.200
Because in this analysis, moving from a charity to a top bracket heir creates roughly$129,000 of swing in the result.
00:19:45.519 --> 00:19:50.720
That is the difference between a strategy that costs her money and one that makes it.
00:19:50.960 --> 00:19:55.920
I have a full episode on exactly how that 10-year rule works and what it costs a family.
00:19:56.079 --> 00:19:57.680
It's linked in the show notes.
00:19:57.920 --> 00:20:00.000
One more thing the model showed.
00:20:00.240 --> 00:20:04.160
There is a second variable worth knowing about, and it surprised me.
00:20:04.319 --> 00:20:09.279
At 6% growth, the bandit strategy wins by about$51,000.
00:20:09.839 --> 00:20:13.200
At 4% growth,$34,000.
00:20:13.759 --> 00:20:18.880
And in this model, at 8% growth, it wins by$92,000.
00:20:19.440 --> 00:20:23.359
The better your portfolio does, the more the conversion can matter.
00:20:23.599 --> 00:20:33.200
Because a bigger balance at$5,000 means a bigger forced distribution, potentially a higher bracket, and potentially larger Medicare surcharges for the rest of your life.
00:20:33.440 --> 00:20:35.759
Doing well is what creates the problem.
00:20:36.000 --> 00:20:39.039
Three things you can do this week without hiring anybody.
00:20:39.279 --> 00:20:44.799
First, find your own single filer lines and write them on one page.
00:20:45.039 --> 00:20:52.640
The Medicare threshold, the top of your 22% bracket, the point where the senior deduction starts phasing out.
00:20:52.960 --> 00:20:57.759
Note which measure of income each one uses because they're not the same.
00:20:58.000 --> 00:21:02.240
If you have been planning from a couple's numbers, this is where you will feel it.
00:21:02.480 --> 00:21:09.839
Second, write down who inherits your IRA, and next to each name, write your honest cast at their tax bracket.
00:21:10.000 --> 00:21:12.720
You do not need a perfect number, just a ballpark.
00:21:12.880 --> 00:21:16.160
And if any of it is going to charity, write zero.
00:21:16.400 --> 00:21:24.799
Think about what they do for a living, whether they're in early in their career or established, or if you know their approximate income range.
00:21:24.960 --> 00:21:34.319
For example, a teacher who is single might be in their 12% to 22% bracket, while someone in a leadership or executive role could be in a much higher bracket.
00:21:34.480 --> 00:21:37.839
Getting close is enough to help you understand the impact.
00:21:38.000 --> 00:21:40.160
That is not just an estate planning detail.
00:21:40.319 --> 00:21:43.599
In this analysis, it was one of the numbers that mattered most.
00:21:43.839 --> 00:21:46.960
It decided whether the winning strategy won at all.
00:21:47.279 --> 00:21:55.440
Third, look at where your spending will come from between the year you stop working and the year your required distributions start.
00:21:55.599 --> 00:22:02.799
If the honest answer is the IRA, some of your conversion room may already be getting used by the withdrawals you need for spending.
00:22:03.039 --> 00:22:06.240
And that is one of the first things a plan has to solve.
00:22:06.480 --> 00:22:12.000
The sequencing behind all of this is in my free guide, the Executive Woman's Tax Playbook.
00:22:12.160 --> 00:22:17.920
It's in the show notes along with a link to book a short 15 minute call if you want your own numbers run.
00:22:18.079 --> 00:22:19.680
I'll see you next episode.