fbpx
U

Roth Conversion: In-Depth Analysis

January 28, 2010

Money-Guy 01-28-2010

Well here it is; we finally did it. You have been writing, calling, and asking for us to explain and go through the nuts and bolts of the Roth conversion and why 2010 is such an important year. You can’t really turn on any financial media or read any financial literature and not come across something that at least mentions or alludes to the this planning opportunity.

So what is so different about the year 2010? Well, there are actually two big differences:

  1. Anyone can do it no matter what their income.
  2. The taxes resulting from a Roth conversion made in 2010 can be deferred over the following two years (2011 and 2012).

Why would you want to have money in a Roth IRA? With a Roth, contributions are made with after-tax money. Simply put, there is no immediate tax benefit from putting money into a Roth IRA. However, that money is allowed to grow tax-free and withdrawals in retirement are tax-free as well assuming certain conditions are met. Not only this, but there are also no Required Minimum Distributions associated with Roth IRAs when you reach age 70 and a half.

As you listen to the show, I will walk through the ins and outs of the process, who it makes sense for, and also who it does not make sense for. As a summary, if any of the following describe you, then you may be a good candidate for the conversion:

  • You can convert at low or no cost
  • Your taxable income is likely to be higher in retirement
  • You anticipate higher tax rates during your withdrawal period
  • You can defer Roth balances past when Required Minimum Distributions are scheduled to begin
  • You seek to potentially maximize after-tax dollars passed to heirs
  • You have outside cash to pay any additional taxes.

I also explain our analysis on how we make the determination for our wealth management clients of whether to convert or not, and, if so, how much they should convert. Hopefully as you listen, you will recognize the questions you should ask and the thoughts you should have to determine if this is a planning opportunity you should take advantage of.

You will also hear me share some listener emails in the show today. This show is produced for you, the listeners, and you have no idea how much we value your comments and feedback! Please keep them coming so that we can provide you with the content you want to hear.

Most Recent Episodes

Dave Ramsey vs. The Money Guy: Which Strategy is The Best?

Dave Ramsey has an incredible legacy of helping folks get out of debt and take control of their financial lives. We agree on a lot of things, but there are a few points of contrast. In this episode, we’ll discuss differences between The Money Guy Show and Dave Ramsey...

Top 4 Financial Mistakes We Saw This Year! (2022)

We saw some wild financial mistakes this year during the bear market. From making extreme changes to portfolio allocation, chasing the hot dot, and using too much leverage, we’ll talk about some of the biggest financial mistakes we saw in 2022 in this episode.   In...

How Millionaires Build Wealth! (With Dave Ramsey)

Join us for a very special episode as we welcome personal finance radio host and influencer Dave Ramsey to The Money Guy Show! There’s so much misinformation out there about building wealth. We had the pleasure of having a great conversation about how millionaires...

Do These 4 Things with Your Finances BEFORE 2023!

There are unique financial opportunities available at the end of the year - especially this year with the market down. In this episode, we’ll talk about what you need to do with your money BEFORE 2023! In this episode, you'll learn: What you need to do with your money...

How to Win When the Financial World is Burning!

Lately it’s felt like the financial world is in chaos, with rising interest rates, a falling stock market, and high inflation. Let’s talk about how to focus on what you can control and how to minimize the time spent worrying about what you can’t control. In this...

Financial Advisors React to RIDICULOUS Money Advice on TikTok!

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and TikTok is the new frontier. Is there good...

Loss Harvesting: Why Wealthy People Love It (And You Should Too!)

Tax-loss harvesting: what is it and should you be doing it? In this episode, we’ll cover everything you need to know about tax-loss harvesting, including whether it makes sense for you, how much it could save you in taxes, and how to eliminate the downside of loss...

The Market is Crashing! (Where Should You Put Your Money?)

The stock market has not had a great year so far. You might be asking yourself, “Since the market is crashing, where should I put my money now?” In this episode, we’ll discuss how to invest when the market is dropping and how to make the most of your money. In this...

Will Rising Interest Rates Tank the Economy?!

The Federal Reserve is raising interest rates to combat inflation, and many are concerned about how it will affect the economy. In this episode, we’ll discuss what rising interest rates means for your wallet and how to make the best of it. In this episode, you'll...

How to Be Wealthy By Age! (Can You Catch Up?)

How much does it take for you to meet your retirement goals by age, and what are some common traps your peers fall into? Learn more about how to be wealthy, mistakes to avoid, and exactly what a little extra saving can do for your retirement income. In this episode,...