July 22, 2025 • 10 mins
“Hey Mike, I'm 60 years old with 1,200,000.0 in a traditional IRA. Should I convert 120,000 each year so I don't have to worry about RMDs?” Discover the problem with aggressive IRA to Roth conversions and the overall tax-free retirement goal.
Text your questions to 913-363-1234.
Request Your Wealth Analysis by going to www.retireontime.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker. I'm a
licensed financial adviser andfiduciary. And joining me here,
Mr. David Franson.
David, thanks for being here.
David (00:15):
Yep. Happy to be here.
Mike (00:15):
As always, we're gonna answer your questions. Text them
to (913) 363-1234. And remember,this is just a show, not
financial advice, so make sureto do your research and
follow-up with whatever we talkabout. David, let's begin.
David (00:29):
Hey, Mike. I'm 60 years old with 1,200,000.0 in a
traditional IRA. Should Iconvert 120,000 each year so I
don't have to worry about RMDs?David, I have
Mike (00:40):
a confession to make. Oh, okay. Alright. This might get
heavy. I submitted thisquestion.
David (00:44):
That is a revelation.
Mike (00:47):
The reason why I submitted this question is because I've
seen this advertisement over andover again online.
David (00:54):
I know what
Mike (00:55):
you're And it's talking so deceptive. Yeah. So here's what
they're trying to do, and I'mgonna give them the benefit of
the doubt. They're trying tohedge against the conversation
of should you act and dosomething like IRA Roth
conversions, or should you notdo anything? That's a well
positioned offer.
(01:15):
Okay? The reason why I hate thisquestion, how it was structured,
is because it gives you thisidea that, okay, I've got
absolute certainty for the mostpart. Ten years, you take the
total amount of the IRA, youjust divide it by ten years, You
do your conversions. You'remaybe maxing out in your
situation, whoever's listening.Maybe it's you're maxing out the
24% tax bracket.
(01:35):
All is well. You're gonna get toa tax free retirement. Here's
the problem. That structure,that rigidity could hurt you
more than help you.
David (01:45):
Why? Why is that?
Mike (01:46):
What is the purpose of your money? Do you want these
assets to be geared towardslegacy? That's one of the first
questions you wanna ask what isthe purpose of your money? What
do you want your money to do foryou? K?
You're 60 years old. Okay. Sothat's what you need to
understand. What's yourlongevity look like? Great.
Let's say you wanna do legacy.Is the legacy intended to go to
your kids? Do your kids make alot of money? If they do, IRA to
(02:08):
Roth conversions may make sense.If your kids don't make a lot of
money, then you would be able tobasically keep your assets in
your IRA, not pay taxes on it,and grow it as much as possible.
Yeah. You're gonna have someRMDs in the future. Right now,
it's it just got pushed back to75 years old, but it's easier to
grow a higher balance, a higherdollar amount than it is a
lesser dollar amount. And sobecause of the compounding
(02:30):
interest or that compoundinggrowth of growing more money,
you may actually end up passingmore to your kids who then would
receive the benefit in their taxbracket. And maybe it'll be
boosted, but no one knows thefuture of the tax brackets.
Okay? So that's one thing toargue. I recently did a plan
where I said, okay. In thisperson's situation and there's
(02:51):
so much variability, so pleasedon't say, oh, this is what
mine's gonna be as well. It'snot.
But in this person, I said,okay. Well, this plan, we have
you have 2,900,000.0 beingpassed to the kids, but it's all
pretax. This one right here isgonna go about 2,200,000.0 going
to your kids, but this is all orfor the most part, Roth. What do
(03:11):
you want? What are you okaywith?
Which one would you prefer? Andwe had a conversation about the
kids, about what they expectedfor taxes in the future, Even
though Trump's tax plan, the onebig beautiful bill says tax
code's permanent, it's alwayschanging. Right. Just wait for
the next administrator, the nextpresident Mhmm. To to pop into
office.
K? So we don't know the futureof taxes, but here's what we do
(03:34):
now. Maintaining a targetedconversion schedule based on an
effective tax rate, which is asimpler way of saying that is
slowly converting over assetseach year, not with the goal to
hit zero, but to get your pretaxaccounts, your retirement
accounts, your IRA accounts, toa certain threshold that your
(03:57):
required minimum distribution,for the most part, matches up
with your standard deduction,makes the rest of your IRA
assets tax
David (04:04):
free. That's interesting.
Mike (04:05):
Because if you let's say you take out 30,000 as your RMB
this year, your required minimumdistribution. K? That's when it
comes up. And you have $30,000in the standard deduction. K.
What's 30,000 of taxable income?Then you take 30,000 and you
deduct it, you're at zero.That's wild. That's that's
better than paying, what, 20some percent in converting it
(04:27):
and then spending it in Rothlater on. So this question, this
advertisement, this conversationof, well, let's just take my
total amount of money divided byten years, max out the 24% tax
bracket.
Financially, I don't think it'sin anyone's best interest, and
it's very few times that I'llsay in anyone as in the
absolute. There may beexceptions to the rule, but if
(04:48):
you can minimize a certainamount and then maintain the
remaining income ordistributions from your accounts
planned around your standarddeduction, or maybe you plan it
around the 10 to 12% taxbracket, that's incredibly
efficient to preserve yourportfolio and to look at the
(05:09):
conversation about taxes. Imean, the question is, how do
you get more out of your money?If you wanna pay the government
the least amount of moneypossible, just convert
everything over this year. Thedollar amount will be less, but
you'll also have less in themarket, less in your accounts.
Yeah. Because the longer yougrow your assets, the greater
the tax bill will be to thegovernment, but the more money
(05:30):
you'll also have. So this ideaof, well, I hate the government.
And I know there's peoplelistening in right now or
watching this on YouTube.They're thinking, oh, no.
This guy's wrong, and andthey'll put their dollar for
dollar compared about it. You'redoing the wrong equations. I've
seen the sales pitches on indexuniversal life insurance, which
I'm licensed to sell, which, bythe way, I do sell in the
(05:53):
situations where they want adeath benefit. But the
manipulation of, well, here'show much your current tax bill
is, and if you don't doanything, here's what it could
be. But if you buy this lifeinsurance policy, which
insurance is not an investment,then your tax bill is gonna go
down this much.
It is so manipulative. Butpeople get caught up in this
idea that, well, this is whatthe wealthy do, or well, this is
(06:15):
what smart investors do, or thisis how you screw the IRS. It is
not.
David (06:20):
It's kinda hard to screw them. Right? They're gonna find
there's ways.
Mike (06:23):
It's like playing chess. You don't magically decide that
your pawn is a queen and canmove all over the table. The IRS
is simple. There are rules. Theinvestment industry, the market
has rules.
The insurance industry hasrules. Everyone's based on
rules. The insurance companiesaren't operating off of a
special market. They'reinvesting in the same market
(06:45):
that you are elsewhere. So sothese ideas of, I'm gonna get to
the zero tax bracket quickly.
I'm gonna structure it. It'sbait and switch sales pitch
advice. Be very, very careful ofthe oversimplified advice of
the, admittedly, of the thingsthat we as humans want to
gravitate towards. For evensimple minded individuals who
(07:05):
don't have a background infinance, that's okay. That's why
we offer analyses.
That's why we offerconsultations. That's why some
people will just pay us for theone time analysis, second
opinion that's little bit morein-depth. There's options out
there. Our job is to explain toyou in a way that you understand
it. But the important thing issimplicity typically has a cost.
(07:28):
Are you okay paying that cost?Whether opportunity cost,
whether it's just less moneyoverall, whether it's less
growth potential, whatever itmight be. Be weary of
oversimplified, well, should youjust do this? Because isolated
strategies, like, let's justconvert everything over for the
next ten years, and it'll bedone. Check it off the list.
(07:50):
That's the kind of stuff thatyou kind of have to put on
blinders and not look at anyother consequences, any other
ways that strategy would affectyour other parts of your plan.
Is that making sense?
David (08:02):
Yeah. I think so. You don't wanna do things just to
sort of, I'll spite you,government. I'll pay as little
as possible, even though you maynot realize that it's actually
hurting.
Mike (08:11):
One of my favorite podcasts of all time is no
longer available, but it wasLSAT in everyday life. So,
originally, I was gonna becomean attorney. Maybe it's that
that part of me that says Iwanna protect the the person
that's disadvantaged. But thethe reality is, and this was
their introduction, is many ofthe conclusions we make aren't
based on the evidence given.Many of the financial strategies
(08:32):
that people are implementingtoday are well intended, but the
result they seek isn't supportedby the strategy they're
implementing because there areother unintended consequences
that they are blind to becausethey're not looking.
We had to create our ownplanning software to be able to
get more surgical and detailedfor these types of questions, to
(08:54):
open up the conversation, tobalance your amount between
pretax, after tax, and tax free,as in your IRA, your Roth, and
your brokerage account. We hadto get more surgical in, okay,
for these five years, we'retaking your income in this way,
and then the five years after,have to take it in that way
because of the tax planning,because of the IRA to Roth
conversion schedules, because ofwhere the assets were and the
(09:16):
risks associated with that plan,because of fill in the blank. We
had to be able to build our ownsoftware to do these kinds of
things because theoversimplified, the set and
forget kind of strategies may beactually causing you to get less
out of your money than you mayrealize. That's all the time
we've got for the show today. Ifyou enjoyed the show, consider
(09:37):
subscribing to it wherever youget your podcast.
Just search for how to retire ontime. Discover if your portfolio
is built to weather flat marketcycles or if you're missing tax
minimization opportunities thatyou may not even know exist.
Explore strategies that may beable to help you lower your
overall risk while potentiallyincreasing your overall growth
and lifestyle flexibility. Thisis not your ordinary financial
(10:00):
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date.
Go to www.yourwealthanalysis.comtoday to learn more and get
started.
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker. I'm a
licensed financial adviser andfiduciary. And joining me here,
Mr. David Franson.
David, thanks for being here.
David (00:15):
Yep. Happy to be here.
Mike (00:15):
As always, we're gonna answer your questions. Text them
to (913) 363-1234. And remember,this is just a show, not
financial advice, so make sureto do your research and
follow-up with whatever we talkabout. David, let's begin.
David (00:29):
Hey, Mike. I'm 60 years old with 1,200,000.0 in a
traditional IRA. Should Iconvert 120,000 each year so I
don't have to worry about RMDs?David, I have
Mike (00:40):
a confession to make. Oh, okay. Alright. This might get
heavy. I submitted thisquestion.
David (00:44):
That is a revelation.
Mike (00:47):
The reason why I submitted this question is because I've
seen this advertisement over andover again online.
David (00:54):
I know what
Mike (00:55):
you're And it's talking so deceptive. Yeah. So here's what
they're trying to do, and I'mgonna give them the benefit of
the doubt. They're trying tohedge against the conversation
of should you act and dosomething like IRA Roth
conversions, or should you notdo anything? That's a well
positioned offer.
(01:15):
Okay? The reason why I hate thisquestion, how it was structured,
is because it gives you thisidea that, okay, I've got
absolute certainty for the mostpart. Ten years, you take the
total amount of the IRA, youjust divide it by ten years, You
do your conversions. You'remaybe maxing out in your
situation, whoever's listening.Maybe it's you're maxing out the
24% tax bracket.
(01:35):
All is well. You're gonna get toa tax free retirement. Here's
the problem. That structure,that rigidity could hurt you
more than help you.
David (01:45):
Why? Why is that?
Mike (01:46):
What is the purpose of your money? Do you want these
assets to be geared towardslegacy? That's one of the first
questions you wanna ask what isthe purpose of your money? What
do you want your money to do foryou? K?
You're 60 years old. Okay. Sothat's what you need to
understand. What's yourlongevity look like? Great.
Let's say you wanna do legacy.Is the legacy intended to go to
your kids? Do your kids make alot of money? If they do, IRA to
(02:08):
Roth conversions may make sense.If your kids don't make a lot of
money, then you would be able tobasically keep your assets in
your IRA, not pay taxes on it,and grow it as much as possible.
Yeah. You're gonna have someRMDs in the future. Right now,
it's it just got pushed back to75 years old, but it's easier to
grow a higher balance, a higherdollar amount than it is a
lesser dollar amount. And sobecause of the compounding
(02:30):
interest or that compoundinggrowth of growing more money,
you may actually end up passingmore to your kids who then would
receive the benefit in their taxbracket. And maybe it'll be
boosted, but no one knows thefuture of the tax brackets.
Okay? So that's one thing toargue. I recently did a plan
where I said, okay. In thisperson's situation and there's
(02:51):
so much variability, so pleasedon't say, oh, this is what
mine's gonna be as well. It'snot.
But in this person, I said,okay. Well, this plan, we have
you have 2,900,000.0 beingpassed to the kids, but it's all
pretax. This one right here isgonna go about 2,200,000.0 going
to your kids, but this is all orfor the most part, Roth. What do
(03:11):
you want? What are you okaywith?
Which one would you prefer? Andwe had a conversation about the
kids, about what they expectedfor taxes in the future, Even
though Trump's tax plan, the onebig beautiful bill says tax
code's permanent, it's alwayschanging. Right. Just wait for
the next administrator, the nextpresident Mhmm. To to pop into
office.
K? So we don't know the futureof taxes, but here's what we do
(03:34):
now. Maintaining a targetedconversion schedule based on an
effective tax rate, which is asimpler way of saying that is
slowly converting over assetseach year, not with the goal to
hit zero, but to get your pretaxaccounts, your retirement
accounts, your IRA accounts, toa certain threshold that your
(03:57):
required minimum distribution,for the most part, matches up
with your standard deduction,makes the rest of your IRA
assets tax
David (04:04):
free. That's interesting.
Mike (04:05):
Because if you let's say you take out 30,000 as your RMB
this year, your required minimumdistribution. K? That's when it
comes up. And you have $30,000in the standard deduction. K.
What's 30,000 of taxable income?Then you take 30,000 and you
deduct it, you're at zero.That's wild. That's that's
better than paying, what, 20some percent in converting it
(04:27):
and then spending it in Rothlater on. So this question, this
advertisement, this conversationof, well, let's just take my
total amount of money divided byten years, max out the 24% tax
bracket.
Financially, I don't think it'sin anyone's best interest, and
it's very few times that I'llsay in anyone as in the
absolute. There may beexceptions to the rule, but if
(04:48):
you can minimize a certainamount and then maintain the
remaining income ordistributions from your accounts
planned around your standarddeduction, or maybe you plan it
around the 10 to 12% taxbracket, that's incredibly
efficient to preserve yourportfolio and to look at the
(05:09):
conversation about taxes. Imean, the question is, how do
you get more out of your money?If you wanna pay the government
the least amount of moneypossible, just convert
everything over this year. Thedollar amount will be less, but
you'll also have less in themarket, less in your accounts.
Yeah. Because the longer yougrow your assets, the greater
the tax bill will be to thegovernment, but the more money
(05:30):
you'll also have. So this ideaof, well, I hate the government.
And I know there's peoplelistening in right now or
watching this on YouTube.They're thinking, oh, no.
This guy's wrong, and andthey'll put their dollar for
dollar compared about it. You'redoing the wrong equations. I've
seen the sales pitches on indexuniversal life insurance, which
I'm licensed to sell, which, bythe way, I do sell in the
(05:53):
situations where they want adeath benefit. But the
manipulation of, well, here'show much your current tax bill
is, and if you don't doanything, here's what it could
be. But if you buy this lifeinsurance policy, which
insurance is not an investment,then your tax bill is gonna go
down this much.
It is so manipulative. Butpeople get caught up in this
idea that, well, this is whatthe wealthy do, or well, this is
(06:15):
what smart investors do, or thisis how you screw the IRS. It is
not.
David (06:20):
It's kinda hard to screw them. Right? They're gonna find
there's ways.
Mike (06:23):
It's like playing chess. You don't magically decide that
your pawn is a queen and canmove all over the table. The IRS
is simple. There are rules. Theinvestment industry, the market
has rules.
The insurance industry hasrules. Everyone's based on
rules. The insurance companiesaren't operating off of a
special market. They'reinvesting in the same market
(06:45):
that you are elsewhere. So sothese ideas of, I'm gonna get to
the zero tax bracket quickly.
I'm gonna structure it. It'sbait and switch sales pitch
advice. Be very, very careful ofthe oversimplified advice of
the, admittedly, of the thingsthat we as humans want to
gravitate towards. For evensimple minded individuals who
(07:05):
don't have a background infinance, that's okay. That's why
we offer analyses.
That's why we offerconsultations. That's why some
people will just pay us for theone time analysis, second
opinion that's little bit morein-depth. There's options out
there. Our job is to explain toyou in a way that you understand
it. But the important thing issimplicity typically has a cost.
(07:28):
Are you okay paying that cost?Whether opportunity cost,
whether it's just less moneyoverall, whether it's less
growth potential, whatever itmight be. Be weary of
oversimplified, well, should youjust do this? Because isolated
strategies, like, let's justconvert everything over for the
next ten years, and it'll bedone. Check it off the list.
(07:50):
That's the kind of stuff thatyou kind of have to put on
blinders and not look at anyother consequences, any other
ways that strategy would affectyour other parts of your plan.
Is that making sense?
David (08:02):
Yeah. I think so. You don't wanna do things just to
sort of, I'll spite you,government. I'll pay as little
as possible, even though you maynot realize that it's actually
hurting.
Mike (08:11):
One of my favorite podcasts of all time is no
longer available, but it wasLSAT in everyday life. So,
originally, I was gonna becomean attorney. Maybe it's that
that part of me that says Iwanna protect the the person
that's disadvantaged. But thethe reality is, and this was
their introduction, is many ofthe conclusions we make aren't
based on the evidence given.Many of the financial strategies
(08:32):
that people are implementingtoday are well intended, but the
result they seek isn't supportedby the strategy they're
implementing because there areother unintended consequences
that they are blind to becausethey're not looking.
We had to create our ownplanning software to be able to
get more surgical and detailedfor these types of questions, to
(08:54):
open up the conversation, tobalance your amount between
pretax, after tax, and tax free,as in your IRA, your Roth, and
your brokerage account. We hadto get more surgical in, okay,
for these five years, we'retaking your income in this way,
and then the five years after,have to take it in that way
because of the tax planning,because of the IRA to Roth
conversion schedules, because ofwhere the assets were and the
(09:16):
risks associated with that plan,because of fill in the blank. We
had to be able to build our ownsoftware to do these kinds of
things because theoversimplified, the set and
forget kind of strategies may beactually causing you to get less
out of your money than you mayrealize. That's all the time
we've got for the show today. Ifyou enjoyed the show, consider
(09:37):
subscribing to it wherever youget your podcast.
Just search for how to retire ontime. Discover if your portfolio
is built to weather flat marketcycles or if you're missing tax
minimization opportunities thatyou may not even know exist.
Explore strategies that may beable to help you lower your
overall risk while potentiallyincreasing your overall growth
and lifestyle flexibility. Thisis not your ordinary financial
(10:00):
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date.
Go to www.yourwealthanalysis.comtoday to learn more and get
started.
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