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Hopefully with Trump winning he will keep the tax rates the same ... great video today!

Thank you for this video, I m finally get a better understanding on how this FPL and Premium Credit works

Everyone talks about Roth Conversions? 1 advisor ch asked a man if u plan on spending the money soon, why are you doing a Roth Coversion and then faking it out over the next few years? Just Take the money out of IRA 401K 403B Ect and put in money marlern high performance saving account, brokerage account. Will NOT Counf as Income

@20Schmidt 0 seconds ago How long does the SSA retirement benefits process normally take? I'm at the 6-month mark now (application confirmation March 20, 2024). Application has been received, reviewed and they say I have the 40+ work credits to receive benefits...no updates for few months. Waiting for award letter. Any insights? Thank You

Always pushing the "Professionals" :)

Learn something

Very good video. I'm a big fan of the roth ira as well. I like that term roth aholic. The money going to my thrift savings plan, my contributions, are in a roth. I also have a roth ira through schwab.

12:10 wrong. Sequence risk is far greater in early years.

4:50 assuming 4% inflation when the TIPs break even is 2, the target is 2, and the historical average is 3 is Moronic. Margin of safety is built into the Monte Carlo, not ridiculous assumptions. Complete Financial planning malpractice.

Way too much time talking about the value of CPA’s and financial advisors.

Great video. I got lucky on my inherited IRA. My Dad passed away in 2020 when I was 59 and in peak earning in 37% bracket. Thanks to IRS turtle speed, RMDs were not required for 2020 through 2024. RMDs start in 2025. I retired this year and are now in the 12% bracket. I will defer SS giving me 6 years to deplete the accounts under the 10 year rule.

But your are forgetting with this premium you are buying really crappy insurance with a lot of deductibles 3000-7000$ and out of pocket limits 11,000-16,000$ a year. So if you need to use this insurance you are still screwed!!

Good video. Solid advice regarding the benefit of trying to give your heirs more tax free. I still believe the Roth conversion decision is separate. You can do other planning such as spending down the tax deferred while leaving your brokerage account and other assets with a step up in basis grow. If you die before fully depleting the IRA it will still depend on your heirs tax rate vs what you will pay to convert.

You state “tax free is always better”. That is misleading because it’s only tax free because you pay tax to get it into that status. Bottom line is the only thing that matters is the % tax you pay now to convert (all in your top marginal bracket) vs later, possibly with a lower effective (average) tax rate, taking advantage of standard deduction and tax brackets that adjust annually for inflation. You need to do the math. FYI I never get a reply because you can’t ignore logic and math and you ONLY benefit from conversion if the tax rate paid is lower. Period.

Continued. Dividends so $100k conversion would cost $26,500 or 26.5%. Instead I plan on reallocating the other assets, delaying SS and withdraw from the IRA to live on so that by the time RMDs kick in I only have SS and RMDs. With 15 years of increases in the standard deduction and tax brackets I will be in much lower than 26.5% EFFECTIVE tax bracket even if I bump into the bottom of the 28% marginal bracket. As for IRMAA surcharges, they also are indexed for inflation and won’t kick in until over $300k by the time RMDs kick in.

Your example saying someone with only RMDs and SS has painted themself in a corner is actually where I am trying to get to. Currently without SS or any RMDs I am at the top of the 12% bracket, all due to interest and dividends. This is even after $42k of deductions (standard deduction, HSA, stock loss). I could convert into the 22% bracket plus pay 15% on $30k of qualified

I also need to comment on the seed and harvest comment because the visual is misleading. It may be beneficial to pay the tax on the harvest, even if you pay more tax dollars. The key is what leaves you the most after tax income. Example. Farmer buys $100 of seed and pays $25 tax today. That grows over the next 20 years to be worth triple or $300 (harvest) all tax free. If instead you did not pay the $25 tax you would have $125 of seed that would triple to $375. If you paid $75 tax on that which is triple what you would have paid to convert, you come out exactly with the same $300 after tax. It’s all about the tax rate. Also when you convert to Roth you pay all the tax up front in today’s dollars at your highest marginal bracket. When you defer you can take advantage of the growing standard deduction and tax brackets adjusted for inflation and if managing your other income well, you may pay a lower effective (average) tax rate later. In fact you may not ever fully pay the tax (although your heirs ultimately will). Bottom line, you have to do the math and not let the visual persuade you.

Good video but I do need to challenge one of your examples. You had someone contributing and deferring in the 32% bracket and now are retired in the 22% bracket thus there is a 10% benefit when converting. It’s actually two independent decisions and the tax bracket you were in has nothing to do with whether converting is now beneficial. The only thing that matters is what the tax % will be when ultimately paid vs the tax % you will pay to convert today. The tax you saved to get tue funds into the account is irrelevant. Here is an example. Person 1 defers $100k over several years in the 37% bracket (a wise decision). They now are in the 22% bracket and considering converting however their calculation shows that they are projected to be in the 15% bracket later in retirement thus converting does not make sense. You can switch it around and take someone that deferred in the 10% bracket (not the best decision) and is now in the 22% bracket. They have other income coming so expect by RMD age they will be in the 28% bracket. Thus they would benefit by converting. As you can see these are independent decisions and there is no correlation between the taxes initially saved and whether you should now convert.

You can’t argue with math. I can convert $100k today and send the IRS a $25k check. Or instead I can let that $25k double to $50k by the time RMDs kick in. At 5% interest that is $2500, more than double the year 1 RMD on the $100k so now you are $51k+ ahead by deferring and you are 76 years old. Yes RMDs increase so maybe you eventually close that $51k gap. When? Age 95? No thanks.

I struggle with the Roth conversion concept. I have significant tax deferred IRA. Year 1 of retirement and turning 63 so this years income will be looked at for IRMAA. I am at the top of the 12% bracket so I could convert $100k without triggering an IRMAA surcharge and can convert $150k without hitting the 3.8% investment income threshold and $200k+ to top of 24% bracket. Here is where I struggle. I have a pension so 85% of my SS will always be taxable so there is no benefit to be had there. $100k or $200k conversion won’t even make a dent in the account, in fact the account growth YTD is over $500k so I would need to put myself into the 37% bracket just to keep the account from growing (a good problem I understand). So let’s play out the $100k conversion example. I will pay $25k tax today ($22k ordinary income and $3k on dividends that are now taxed at 15% instead of zero). If I don’t convert I will likely be in the 28% bracket when RMDs kick in. Year 1 RMD on that $100k will be about $3,600 so at 28% tax that is $1000. Meanwhile the $25k that I have invested the past 13 years is now worth $50k and at 5% interest is generating $2500, more than double the $1000 extra tax. I appreciate that RMDs go up each year but so does the standard deduction and tax bracket ceilings so more income each year falls into lower brackets.

Your best comment on reason to convert is a hedge against future tax increases. That and the widow tax are the only reasons I would consider a conversion. As for taxes on SS and IRMAA a couple of comments. You won’t have both issues, meaning if you are close to being able to have some of your SS not taxable at 85%, you are far away from IRMAA. RMDs themselves won’t put you into IRMAA. The year 1 RMD on a $5m IRA is less than $200k. If you are 60 today, IRMAA limit will be above $300k in 15 years when RMDs kick in.

If you were my advisor I would fire you. I will take the government plan. My first RMD is 15 years away. Year 1 RMD on $1m will be about $35k added to $40k of SS. Total $55k with half of SS counted in calculating taxable income. Standard deduction in 15 years with inflation adjustments will be $40k+. Tax will be zero or minimal. Much less than conversion to Roth.

Unless you have significant income outside your IRA and SS, converting in the 22% and 24% is unlikely to provide a significant benefit (putting aside the widow tax which is a legitimate issue). Example. You are 60 years old with a $1m traditional IRA with income at top of 12% bracket, including cap gains and dividends taxed at zero. Converting $100k today would be taxed at 22% and also cause your cap gains to be taxed at 15%. If you deferred and your taxable account grew to $2m by the time RMDs kick in, your year 1 RMD will be less than $80k. Taking advantage of the standard deduction and low tax brackets, both adjusted annually for inflation, you will pay an average tax as low as 10% on the withdrawal. It does assume you don’t have other income except SS but with 15 years to plan, you have plenty of time to reallocate your money into stocks, municipal bonds, and other investments not taxed annually.

2:10 "How to pay as little [tax] as possible over my lifetime" is actually incorrect as real objective is to "have as much spendable income over your lifetime." One can pay more in tax but still have more spendable income than someone who pays less in tax.

should you pick up a ira comversion and do a back door to roth?

How do these guys call themselves professionals 😂. I would like to see what investment makes sense to a 5 yr old. Jokesters

Be careful. Check with your CPA or Tax Advisor before making your move.

Paying less in taxes does not mean you come out ahead especially as it relates to Roth conversions. I can show an example where you and your heirs pay twice as many tax dollars (but a lower average tax rate) and come out ahead by deferring.

Very good content. Got the full name of IRMMA incorrect, but it should have included Medicare instead of Monthly.😊

With Roth conversions, I understand each conversion starts it's own 5 year clock. What happens if you do a Roth conversion for this purpose and then take it out before the 5 years?

Everyone’s situation is different. If you are frugal and can live comfortably on SS/pension and your 401k then yes all that is taxable. But that makes everything else tax free, which includes a brokerage account where you can defer gains indefinitely, harvest losses and your heirs get a step up in basis. Life Insurance is also tax free as is real estate if a primary residence or if you don’t sell (step up in basis for heirs).

In this case, it sounds like this government plan is doing what it advertised. Marty said he had clients that wouldn't have been able to retire before 65 without the ACA. I plan to utilize it as well.

What about the 5 year rule where you can't touch your money invested in a Roth...Can you talk about that.

It’s not about paying less tax. The reason you pay less tax when you convert is that you have a lower balance in your account. You can pay more tax and still come out ahead. Here is an example. Convert $100k to Roth and pay $25k tax. It doubles over X number of years to $200k tax free. If you don’t convert your $100k also doubles to $200k and the $25k you would have used to pay tax also doubles so you have $250k pre tax. You could pay $50k in tax, double the amount if conversion and still end up with the same $200k. However, you don’t pay that all at once if it’s an RMD. Year one on $200k would only tax $8k, so at same 25% rate it would be $2k of tax. At a conservative 5% interest rate, the $50k extra you have from not converting would earn $2500, more than enough to pay the tax without touching the principal. Yes RMDs do go up over time but I ran the numbers out to age 90 before you would use up all the principal and interest on the income from not converting.

Very informative video - thank you so much! I keep forgetting that I can use our HSA - it’s not much, but can last for many years of ACA, in case we can use it to pay for premiums. Can we pay monthly aca premiums from HSA, without having medical receipts to get money out?

Thank you both for sharing such great information!

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1) Not mentioned - isn’t there typically protection from creditors and lawsuits for money held in a 401K/403b plan that disappears in a IRA? This might be a reason to do a partial IRA rollover for near term spending. 2) If your 401K plan is large enough, the index funds in it might be the Institutional versions of the funds, whereas the retail versions would probably only be available outside that 401K funds plan. Institutional index funds have lower fees vs retail versions. 3) Something I’ve never understood if employers are fiduciaries for their employees - why do 75%+ of the 401K plans administered by both Vanguard and Fidelity (the largest administrator) require that 401K withdrawals can only be made pro-rata across all of your invested funds? That is, if you’re attempting to execute a near term spending “bucket” strategy of keeping that near term spending money in cash to avoid withdrawals from the market when it is down, you cannot do it!

Can u convert to a roth after taking your first mandatory distribution at age required

The dumbest statement in the video is that the client does not win. Let’s throw this scenario. Because there are fees in 401k’s and Ira’s yes let’s put it out there what my commission is. If someone takes an IUL, yes I get the first years commission…. So let’s say that person is paying 200 a month. Yes I get 100% 2400 paid the very next day….. or week. The insurance company starts making money on its fees year 1-3 or 5……, whatever it is……. If that client was to pass away…. Their family get insurance money! 100-200k! Investing 2400- 12k and they pass away in the first 5 years of the policy and their family get 100-200k in insurance money….. y’all are buggin! That’s a win! Now if they don’t die, there are living benefits with these policies….. you get a critical Illness, your family get 25-75% of the death benefit to help take care of you! That’s a fucking win! Let’s say you don’t die, you don’t get an illness or injured, you live a long healthy life. Kids going to college, or getting married, you take money to gift or help your family…… tax free! That’s a fucking win! You don’t die, you don’t get an illness or injured, you don’t use the living benefits, you never take a loan out, and you go to retire….. you still have 100-200k life insurance….. policy or more by this time and cash built to withdraw for retirement. And this money is tax free! And this money does not count towards social security income so it does not put you in a higher tax bracket……… that’s a fucking win! We can all play the game of the markets could pay you more. Yes the markets could pay you more. But the markets timing is not on anybody side. You could be in retirement years and take a huge loss in the markets….. I’ve seen and sat with plenty of people in their late 60’s early 70’s who still have to work because their 401k took a shit on them. Timing took a shit on them. Every last one of them had wished they could have invested in an IUL. Yes an IUL is safer, less risk, less growth. But it’s consistent and literally the best product on the market right now. Don’t believe me, look up Wareen buffet and his million dollar bet on IUL’s. Over a span of 15 years, IUL’s outperformed all us indices! Over the long haul. IUL’s is the way to go if you have the money to fund them for downside protection, living benefits, and life insurance.

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see th-cam.com/video/T7QebIbugcM/w-d-xo.html 0:15 Is there an online calculator that helps people understand this required minimum distribution case that you describe? Let's use some real numbers? They were a couple retiring at 68 and ending up because of RMD paying more in tax than they budgeted for themselves. It would be helpful if the IRS / SSA / etc. simply showed a projection of the possible outcomes. It seems very odd that this couple does everything right and they are caught in a "political tax trap" because they worked their whole lives. Amazing!

Promo`SM 🤪

probably one of the worse financial advice I have EVER heard. Even a baby can answer this question. Would you rather pay taxes when you retire or pay no taxes when you retire? And the chances of MEC are next to ZERO. Why would anyone over pay their insurance policy? Possibly a very very rich person may have a reason to do so. They show you exactly what your limit is before the policy becomes a MEC. And you have to sign off on it. I would try and find what was good advice in this video but I would have to listen to this again.

This is not good advice.

Almost no usable information.

10k works. I’m living on 7.5 with 10k in so I’m only saving 2.5. Poop, so I’m rich now and will only be more rich later.

Another security licensed individual giving a horrible explanation of how cash value policies work. Explain why banks put over 1/3 of deposits into cash value life insurance and why corporations also but tons of money into cash value life insurance. What was being said was so far off base, it is down right ridiculous. You talk about a big up front commission, in fact a properly structured life insurance policy that provides high early cash value, pays far less commission than otherwise could be earned. In the grand scheme of things, let's talk about assets under management. Do you only get paid if the client has a gain? Do you only get paid once? NOOOO. You keep getting paid whether you manage to help them get a gain or manage to help them get a loss.