Roth Q&A

Episode Transcript

Speaker 1 (00:00):
We're joined this morning by our retirement planning professionals from
Class Financial, CJ. Closs and Nate Briby. Don't free. You
can learn more about Class Financial on their website coss
financial dot com. That's coss k l aa S Financial
dot com. Great website and resource there. Of course, not
only can you get to know Coss Financial their separate divisions,
how they can help you or if you're an employer,

(00:21):
some great options there for you. You can also learn about
the team and oh there's more. You can sign up
for the weekly market Pulse newsletter that available to you
at Cossfinancial dot com. Tell phone up for the office
right here in Madison six oh eight four four two
five six three seven. No charge for that initial gets
to know the appointment tech Loss Financial. It will be
complimentary to you again their number six oh eight four

(00:42):
four two five six three seven. If you've got a question,
get you on the air this morning at six oh
eight three two one thirteen ten at six oh eight
three two one thirteen ten. As mentioned joining us this
morning is CJ. Closs and Nate Briby. CJ.

Speaker 2 (00:54):
How you been I'm doing great, Happy snowy day, Sean.

Speaker 1 (00:57):
It is is a very happy snowy day. And did
you beat it? By the way, I gotta ask a CJ.
Did you beat the snowfall on your way in this morning?
Or did you catch you?

Speaker 2 (01:05):
It caught me. It took me a little bit longer
to get in here. I was rushing indventure, I was
ready for the show.

Speaker 1 (01:09):
Well, it's great to have you this morning, Nate. How
have you been.

Speaker 3 (01:14):
I've been doing good. Happy holidays and Merry Christmas to
everyone out there.

Speaker 1 (01:17):
Merry Christmas to you as well, and it's great to
have you along. How was your driving? Not too bad?

Speaker 3 (01:22):
Not too bad. We didn't get any snow down here.
That was yesterday.

Speaker 1 (01:25):
Oh yeah, yeah, you're lucky you're down. You're down in
the Rockford location this morning, so you get to uh,
you get to work out of that office. So yes,
we've got a great a great conversation head involving Roth.
IRA's four Roth four oh one K. It's also conversions,
really important stuff to know, and we're gonna get a
lot of great information from CJ and Nick. Nate as

(01:46):
the program rolls on. This morning mentioned the website class
financial dot com. Also they're telling phone number six so
eight four four to two, five, six, three seven one
of the things I haven't mentioned yet, and it's a
biggie Class Quiz question a week we'll be doing one.
Maybe a chance for you to win yourself a nice
little holiday gift. This week a chance to win a
twenty five dollars gift card to Texas Roadhouse from our
friends at Class Financial. Tell you a little bit more

(02:08):
in detail how you can win the Class Quiz Question
Week prize a little bit later on the program, but
just a little tip. It pays a number of ways
get some great information. Also chance to win if you
pay close attention to the program. And before we start
on this week's topic, as a matter of fact, let's
take a look back at last week's Class Quiz Question Week.
Get the question and the answer there as well.

Speaker 4 (02:28):
Yep, and as always, thanks everyone for continuing to listen.
We really enjoy the show and hope you get a
lot out of the information as well. So congratulations Tory
won it from last week. Jeremy of Madison, who correctly
answered the true or false question of IRA contribution levels
in twenty twenty five, will remain the same at seven

(02:49):
thousand dollars. If you're under the age of fifty and
the correct answer was true. Fun fact with those those
do get adjusted each year for inflation.

Speaker 3 (02:58):
I believe in like one hundred dollars increment.

Speaker 4 (03:00):
So the government says inflation last year was mild, so
there was no adjustment there. But those do tend to
adjust one hundred dollars increments throughout the years.

Speaker 1 (03:09):
Nice work, Jeremy, and you could be like Jeremy as well.
This week's chance to win again a twenty five dollars
gift guard at Texas Roadhouse. By the way, if you
missed last week's program or any of the shows even today,
I know for a lot of folks, maybe I you're
stopping in stepping into the coffee shop to pick up
some mott Coco or a mocha, you missed part of
the program. You can always listen back at class Financial
dot com. That's Claus k l aa s Financial dot

(03:31):
com so CJ. Today, our overall retirement planning topics going
to revolve around Roth iras, Wroth four O one k's
and Roth conversions. What should we know there?

Speaker 2 (03:42):
Yeah, I'm excited for the topic today to have Nate
Briby on. He's one of our super smart kind of
math nerds and really truth be Told has helped our
organization get sharper around things like roth contributions, pre tax contributions,
conversions and exactly when they make sense. So excited to
have him on and kind of talk about this. But
as many people know, you may have several options when

(04:06):
it comes to storing away money in your retirement accounts,
things like four to one k's, four h three b's Iras.
Of course, it depends on where you work and what
options are offered to you, but there can be multiple
savings options. Now most people know traditionally these plans have
or people have added money to these plans from their
paychecks to to traditional aka pre tax contributions, whether it

(04:31):
be to their four to oh one K or IRA.
In the industry, we call these traditional contributions because they
have been around the longest. And the idea of this
is that, hey, when I put money into these plans,
I get a deduction. So if I make one hundred
thousand dollars a year and I put ten thousand dollars
into the traditional aka pre tax portion of my four

(04:51):
to one K plan, I only pay tax on ninety
thousand dollars because that ten thousand dollars was put in
pre tax to my retirement plan. Now, when you do
that hypothetically, that ten dollars then grows what's called tax
deferred all the way out until you get to retirement.
So if you think about it, my original ten thousand,
I never pay tax on the growth I have not

(05:12):
paid tax on it's been compounding over all of those years,
so that when I get into retirement and I'm say
sixty five years old, and I go to pull money
out to live off, of of course I pay income
taxes at that time. Now here's where it changes. Back
in nineteen ninety seven, wroth irays were introduced and became
a way for people to begin saving retirement dollars with

(05:34):
after tax money. Since the contributions to roth irays are
non taxable or are not tax deductible on the front end,
that means that when you put in again, in my example,
if I make one hundred thousand, and I put ten
thousand dollars into a wroth four oh one K or
wroth ira and actually, let me take a step back.

(05:55):
I make ten thousand dollars and I put seven grand
into a roth iray, I'm going to stick with real
numbers here. If I did that, I still pay tax
on the full one hundred thousand dollars because WROTH contributions
are done with post tax dollars. Therefore, in that example,
when I put that seven thousand dollars in, I've already
paid tax on the seven thousand. The growth is then

(06:18):
still considered tax deferred or tax free if you leave
it in there until retirement, so or until age fifty
nine and a half under most circumstances. So the idea
of this being simple. Hey, the most long standing rules
around retirement savings were the traditional pre tax contributions. In

(06:39):
nineteen ninety seven, Roth iras were introduced, whereby we could
put money into post tax with tax free growth. And so,
of course a lot of people just want to know, like, well,
Nate CJ, which one is better?

Speaker 1 (06:54):
And truth be told, there is a lot.

Speaker 2 (06:56):
And I mean a lot of misinformation when it comes
to which one of these is better. You'll have people
say things like, well, everybody knows taxes are going to
go up, so you should do all WROTH pay the
taxes today so that you don't have to pay them
in the future. Man, oh man, you all We've done
this for a long time, and I can say that
is really bad guidance. I just would not suggest you

(07:18):
take that guidance. And that's not me disagreeing that taxes
may not go up. That's that's a separate issue. But
the notion that you should do all wroth just because
it grows tax free and everybody knows taxes are going
to go up, you are missing a ton of nuance
in that statement. So what we're trying to do today
is to say, hey, pre tax has been around for
a while, we've got wroth, Which one should you be doing?

(07:40):
And what are the factors that you should be considering?

Speaker 1 (07:44):
Talking this morning with CJ Closs and Nate Briby. They
are our retirement planning professionals from Class Financial. You can
learn more about Class Financial the website class financial dot com.
That's colss k l aas financial dot com. There's allf
for number six So eight four four two five six
three seven And then I'm gonna get on the air
this morning, So wait three two one thirteen ten. That's
three two one thirteen ten. So CJ, what do we

(08:05):
need to know then when it comes to iras.

Speaker 2 (08:08):
Yes, so roth irays just quick update, and Nate kind
of hinted at this at the beginning, But roth iras
uh do have restrictions in terms of how much you
can put into them. So in the year twenty twenty five,
so come next year, if you are under the age
of fifty, you can put in a maximum of seven
thousand dollars into a roth ira or eight thousand dollars
if you're over the age of fifty, and that that

(08:30):
extra one thousand dollars is called a catch up contribution,
So seven thousand or eight thousand, depending upon your age. Now,
just like with traditional iras, you do need to have
earned income to make contributions. If you have if you've
earned less than the maximum contribution limits. So think if
I if I earn six thousand dollars, then that is
the maximum that I can contribute to that roth account

(08:51):
because I have to have enough income to offset my
full contribution. So IRS sets high limits. If you don't
earn an enough to meet that high limit and you
want to put that all into an account, you can
still put one hundred percent of your earnings up to
those caps I just mentioned. Now, Interestingly, outside of these
contribution limitations, There's also then what's called an income limitation.

(09:16):
So depending upon your tax filing status and how much
you're modified adjusted gross income is. If you're single or
head of household, your contributions are allowed into a roth
IRA with income under one hundred and fifty thousand, and
then it phases out between one point fifty and one
sixty five. If you're married filing jointly, contributions are allowed

(09:39):
with income under two hundred and thirty six thousand, and
they phase out between two thirty six and two forty six.
Now some of you are going, huh, well again, Unfortunately,
our industry loves complexity, and I shouldn't even say our industry,
we don't love it. The irs puts this complexity upon us.

(09:59):
So what we're getting at here is you can only
put so much in seven or eight thousand, depending up
on your agent that's doing a roth IRA, you have
to have enough earned income to offset that contribution, and finally,
you can't have too much income total in the form
of modified adjuster gross income, otherwise you're not eligible to
even contribute. Have we sufficiently confused you? Now? Nate and

(10:24):
I do this in our sleep, because we've done this
for so stinking long that we can take about two
seconds to figure out whether or not somebody's eligible and
how much they should contribute, and even if they should
be contributing. But another thing to be aware of again,
ROTH contributions are post tax. They grow tax free. Well,
interestingly enough, your contributions that, when in post tax, can

(10:47):
be removed at any time without any tax or penalty.
Let me repeat that. Yes, unlike with a traditional IRA,
where you get a deduction and you can't touch any
of that money unless you meet an exception or get
to retirement, in the case of a roth IRA contribution,
when you put in the seven grand in my example,

(11:09):
you could a year later say, oh, man, I made
a mistake. I need to pull that back out, or
ooh I need that money for kids college education. And
the accumulation of all of your contributions can be removed
at any time without any tax or any penalty. The
growth must stay in there generally until age fifty nine
and a half or five years, whichever comes later. More

(11:30):
to come on that in the future. Now, as we
all probably understand, this whole decision around roth versus pre tax,
as I said, is much more nuanced and complex than
just your belief around the tax code. What Nate and
I would say is most of the people that we
work with should be doing and do perform pre tax contributions.

(11:52):
They're not doing roth IRA or wroth for one K contributions.
And the reason is because most of the people that
we work with have a lot higher total income while
they're working, then they will need in retirement to live
the same lifestyle. Let me repeat that, the vast majority

(12:12):
of people we work with, and truth be told, the
vast majority of Americans need more income while they have
children at home and have a mortgage and are trying
to save a retirement. They need a lot more income
in their middle income years, then they will need in
their retirement years to live the same lifestyle. And therefore

(12:33):
you could benefit by saving the say twenty two or
twenty four percent income tax bracket, pushing it out into
the future when you may be in the twelve percent bracket.
And final thought here for those of you who are saying,
but CJ, everybody knows taxes are going up. Even if
you're right and taxes go up, I highly doubt that
a Republican or Democratic president is going to say, let's

(12:55):
take it from those low income retirees. Okay, so if
BRACK are going to go up, they're going to go
up on high income individuals. Not and I could even
say middle So let's say middle or high income innative individuals,
not lower income debt free retirees who are in the
twelve percent bracket. And this is not conjecture. We have

(13:16):
actually tracked the US tax code since inception. We have
all the data going back to when it began, and
that has played out to be true. So long story short,
this whole pretax versus roth contribution. Unfortunately, you need to
talk to a qualified advisor or accountant to get good guidance.

Speaker 1 (13:32):
Talk this morning with CJ. Class and Nate Briby. They
are our retirement planning professionals from Class Financial. The website
class financial dot com. That's coss k l aasfinancial dot com.
Great website and resource to learn more about COSS Financial.
The telephone number six oh eight four four two five
six three seven. Don't forget no charge for that initial
get to know you appointment at COSS Financial. It will

(13:52):
be complementary to you. All I got to do is
pick a phone schedule that appointment at six oh eight, four, four, two, five, six,
three seven. We'll continue our conversation with c J and Nate.
We'll talk about maybe you have access if you have
access to roth ro one K, should we consider contributed
to one. We'll get the details on that and so
much more next as Money in Motion with Coss Financial
continues right here on thirteen ten. W IBI chatting this

(14:15):
week with CJ. Closs and Nate Briby. They are our
retirement planning professionals from Class Financial. Their website Class financial
dot com. That's Claus k l a A s financial
dot com. A great information about Coss Financial. Also an
opportunity to sign up for the weekly Market Pulse newsletter.
And you said, can subscribe or listen back to the
podcast again that available to you at classfinancial dot Com.

(14:36):
Talking this week about roth iras Roth four oh one ks,
roth conversions a lot, a lot of really good benefits.
As we as we talk about these options for folks
and Nata, I've got to ask, if you have access
to a Wroth four oh one K, is that something
we should consider contributing to?

Speaker 4 (14:54):
Well?

Speaker 3 (14:55):
Maybe?

Speaker 4 (14:56):
Okay, So the ideal way to save is to defer taxes,
meaning save pre tax when you're in higher tax brackets
and pay taxes when you're in lower tax brackets, meaning
contribute to.

Speaker 3 (15:07):
The Wroth side of the plan.

Speaker 4 (15:09):
But how will you know if you'll be in a
higher or lower tax than during your working years. Admittedly
you won't, especially if you are decades away from retiring.

Speaker 3 (15:19):
It will be an educated guess.

Speaker 4 (15:21):
And of course the tax code is written in pencil,
not pen right, So here at COSS, part of our
financial planning process is to make tax projections based on
your situation and make recommendation we think you should be contributing.
And it's not as simple as just comparing marginal tax brackets.
By the way, it's actually comparing what is known as
effective marginal tax rates.

Speaker 3 (15:43):
So we don't have to get in that today.

Speaker 4 (15:45):
But think, for example, if you're in the twenty four
percent bracket today, you say I'm going to defer thirty
thousand dollars into my four when four percent tax on that,
and then say at sixty three you're retired, and we'll
talk about a Roth conversion. In a second, you're on
the Affordable Care Act for health insurance, receiving premium tax credits,

(16:05):
and you're drawing your Social Security. There is a world
while all still being in the twelve percent tax bracket,
there is a world where your effective marginal rate on
converting that thirty thousand dollars is much higher than twenty
four percent, actually, up to somewhere near thirty percent when
you look at the effect of losing premium tax credits
and taxability of Social Security. So way too much information there,

(16:27):
I'm sorry, but you just have to understand it's not
as simple as comparing your marginal bracket at the end
of the day. So, like CJ said, what we see
in practice, however, is most of our clients will be
in a lower bracket in retirement than they were during
their working years and should be contributing pre tax potentially
while they're working.

Speaker 3 (16:45):
Especially if they're a dual income household.

Speaker 4 (16:46):
By the way, I hate rules of thumb truly, but
one here, maybe if you're in the twenty four percent,
it may make sense to differ pre tax, so you know,
lower tax brackets like ten or twelve percent, it may
make sense to defer wroth. You know, obviously the exception,
you know, the one we always see as if you're
younger just starting your career and not earning much ROTH

(17:08):
deferrals into a four to one K plan may make
sense once again in that ten or twelve percent bracket.
So a lot to know about Roth Fourah one k's
their first offered as an option to retirement plans back
in two thousand and six, obviously after ninety seven when
roth iras were introduced and have now grown to be
included in almost ninety percent of plans. One important thing

(17:31):
to note is that there are no income limits when
contributing to a ROTH four oh one K like there
are with roth Ira contributions, which makes me think it's like, well,
wait a minute, if you are making a half million
dollars plus a year and have a high income, should
you be contributing to a ROTH for one K at all?

Speaker 3 (17:50):
You know, I don't think that's as helpful as people think.

Speaker 2 (17:51):
It is.

Speaker 4 (17:54):
The maximum you can contribute in twenty five Okay, now
this is to a retirement plan four to one K.
A ROTH Foil one K would be twenty three thousand,
five hundred and then up to thirty one thousand total
with the ketchup contribution there if you're over fifty. Now
a fun new super Ketchup has been introduced recently through

(18:16):
Secure two point uh Secure Act two point zero. That are,
if you are just age sixty to sixty three, so
those four years, your ketchup contribution is actually eleven thousand
and two fifty, making your maximum annual deferral on either side.

Speaker 3 (18:32):
Com to be thirty four thousand and seven to fifty.

Speaker 4 (18:36):
And to further complicate this, there's talk that higher earners
of that super ketchup contribution having to make those Ketchup
deferrals to the WROTH side of the plan, potentially starting
in twenty twenty six.

Speaker 3 (18:48):
So there we go.

Speaker 1 (18:49):
Oh my gosh, and Nate, anything else we want to
we want to be aware of. I know there have
been some some changes, some changes around rmds, haven't there.

Speaker 3 (18:57):
Yes, yeah, absolutely so.

Speaker 4 (18:58):
A special note with the ROTH four oh and k's
a wonky rule a few years ago was that if
you had a ROTH four oh one K and kept
your money in that company sponsored retirement planned and reach
your required minimum beginning date required beginning date age seventy
three call it, you would actually have to take minimum distributions. However,

(19:19):
if you rolled that money into a ROTH IRA, you
would not be subject to r mds. That recently changed
as well, so beginning this year in twenty four, there
are no required minimum distributions from ROTH four and K plan.

Speaker 1 (19:32):
Really important note there as we talked with Nate Briby
and CJ Closs our retirement planning professionals from Class Financial
to website Class Financial dot com. That's Coss k l
a a as Financial dot com. They're telephone number six
so eight four four two five six three seven. So CJ,
what about ROTH conversions? I hear a lot about that.
Who might be a good candidate for doing that?

Speaker 2 (19:53):
I think that's actually still Nate sectional.

Speaker 1 (19:54):
Oh so I apologize? Oh no, I I apologize Nate.
Yet it's all good.

Speaker 3 (19:59):
She doesn't want to still my thunder and this this
is a fun one.

Speaker 2 (20:01):
So I wasn't.

Speaker 3 (20:05):
This is this is a good one. This is a
great question. Seriously.

Speaker 4 (20:07):
So ROTH conversions, which are different from ROTH contributions, okay,
allow individuals to convert existing pre tax retirement money into
ROTH accounts.

Speaker 3 (20:18):
Okay.

Speaker 4 (20:18):
So I have one hundred thousand dollars in my four
O one K or traditional ira that can be flipped
converting into a ROTH ira at any point.

Speaker 3 (20:25):
Okay, So this.

Speaker 4 (20:26):
Can be done in any age and without the ten
percent early which were all penalty if you're under age
fifty nine and a half. Right, because I'm still keeping
the money in a retirement plan, I'm not withdrawing it.
I'm just paying taxes on it, which obviously, if you
think about it, the government's happy to let you do
it anytime because you're paying taxes sooner than you have
to write. So that's the question is, you know, if

(20:47):
we're essentially paying taxes sooner than you need to, why
would you do that. You know, as we mentioned before,
pre tax retirement accounts are fully taxable when distributed, whether
that be to you, your spouse, or children if they
inherit the money. So you're not going to be able
to control the fact that that's going to be taxable
to somebody at some point. But what you can control

(21:07):
to some extent is what tax rate you pay on
these funds. Right. So it does help to view tax
brackets more as tax buckets, which can be filled up
annually but are then emptied at the end of every year.
If you notice you are in a lower tax year
due to starting a new new job or a new business,
starting a family, or maybe a spouse retiring and maybe

(21:29):
wise to accelerate some income via a wrath conversion to
fill up a lower tax bracket. So a good candidate
for a wrath conversion may be somebody who has just
retired and may not have claimed their Social Security yet
or a pension, and has a large retirement account think
a half million to million dollars plus and plenty of
cash or non qualified investments to live off for a
few years. This person could utilize their lower tax brackets

(21:52):
and to accelerate income today at a lower rate before
they claim their Social Security or pension and are subject
to rm DS. One factor to understand the best one
one factor to understand is well, how do you pay
the tax on the wrath conversion? Right? Since it is
tax in the year that you convert the money. While
some may know that you could withhold the tax directly
from the converted amount, that is not the most effective way.

(22:16):
That is because you have less money actually going into
the wroth account right due to withholding the money for taxes.
So ideally we like to see our clients pay this
tax from their bank accounts, thereby allowing the full converted
amount to be placed in the roth account and continuing
to grow tax free. So bearing that in mind, someone
with a fair amount of cash at the bank would
be a good candidate for wrath conversions.

Speaker 1 (22:38):
Yeah. Great to observation there and of course great tools
as we talked this morning with Nate Briby and CJ Closs,
our retirement planning professionals from Coss Financial, some really important
stuff this week. Don't forget if you missed part today's program.
It's always easy to listen back, just heading over to
Classfinancial dot com. That's Coss k l Aasfinancial dot com.
Listen to the podcast right. They're also more information about

(22:59):
Class Financial on their website. Speaking of contacting Class Financial,
pick phone, give me a call this morning six oh
eight four four two five six three seven. Don't forget
there's no charge for that initial get to know your
appointment tech costs financial. It is complementary to you again
their number six oh eight four four two five six
three seven. We'll bring CJ back in and the next
segment to walls through the COLS Quiz Question of the
Week and wrap up this week's edition of Money in

(23:22):
Motion with Coss Financial. We will do that next as
Money in Motion with Coss Financial continues right here on
thirteen ten. Wuib I chatting this week with Nate Briby
and CJ Closs, our retirement planning professionals from COSS Financial.
I hope you've had a chance to check out the
website Cossfinancial dot com. If you have it, when you
get into the office this morning, head on over there.

(23:43):
Don't forget a lot of great resources and information available
to you at cosfinancial dot com. They're telephon number six
oh eight four four two five six three seven, no
charge for the initial gets to know your appointment tech
Coss Financial. It will be complementary to you. So, CJ,
what if somebody wants to leave their assets to THEO
so the grandkids. Does a Roth conversion in that situation

(24:03):
make sense? And another thing to think about when it
comes to making sense, how much should somebody consider converting?

Speaker 2 (24:12):
Yeah, great question. Well, as you can tell from what
Nate was just going over there in this previous segment,
Roth versus pretax is little more complicated than most people realize.
Often there's a lot of misinformation surrounding this topic of
roth versus pretax. And then finally, when you get into
this progression or thought logic, around ROTH conversions, so these

(24:35):
are not new contributions, but rather conversions. Then it can
feel like Nate and I are talking about it out
of both sides of our mouth. So let me explain
what I mean. Most people, as we talked about before,
should probably be doing pre tax contributions when they are
middle to higher income earners in their prime of their
earning years, maybe a couple higher income, because in retire

(25:00):
they will need less dollars to live the same lifestyle,
assuming they've paid off debt and children are grown. YadA YadA. Now,
these are rules of thumbs, so be cautious. You should
always talk to your advisor account about what you should
be doing. But where we end up talking out of
both sides of our mouths. Mouths is often will say great,
now that you've done what we said, and you're debt
free and you're in retirement and maybe you haven't turned

(25:20):
on Social Security yet and you're sixty two years old,
we go, now you should convert to ROTH. People say, say,
what what do you mean? I thought you said I
shouldn't be doing ROTH contributions, And we say, you shouldn't
have been because while you were working, your top dollar
was taxed at say twenty four percent. But now that
you're in retirement, if we were to convert from pre

(25:43):
tax to ROTH, you could convert in say the twelve
or the twenty two percent bracket. Now, interestingly enough, this
whole notion of conversions is really predicated on a lot
of background assumptions. I'm not going to actually go into
those assumptions. All I would say to you is, if
you are trying to do Roth convert versions as a
do it your self for strategy, warning, warning, warning, And

(26:05):
this is not because I don't want you to do
it on your own. It's rather because there are so
many elements to consider when it comes to a Wroth conversion.
I would highly suggest that you talk to at a
minimum trusted accountant and at a maximum a good financial advisor.
So many different considerations about how or when or why
to do this. But here's the notion. If you have

(26:25):
a legacy goal of saying, hey, I've saved more than
I will probably need, I'm interested in leaving money to
my children and grandchildren when I die, which is a
lot of the people that we work with. By the way,
a Wroth conversion could make a lot of sense because
you are converting from pre tax to wroth. When you
do so, you're paying taxes. By the way, you're doing
at a lower rate than you would have done on

(26:46):
the contribution side when you were working hypothetically. And finally,
when you do that wroth conversion, all future growth on
that WROTH money, as we just talked about previously, is
tax free, so that when it goes to your children
or grandchildren, they owe no income tax. And here's a
final reason why that would matter, because ultimately your children

(27:11):
or grandchildren under most circumstances are going to have to
have that money out within ten years from the retirement
account under new new legislation. And when I send a
new legislation this is part of the Secure Act one
point zero and two point zero that now it has
to come out over ten years. And the problem is
if you leave your children, say a million dollars in

(27:31):
a pre tax retirement account, they got to get that
money out in ten years and pay income taxes on it.
Whereas if you leave them money in a roth account,
they still have to get it out within ten years,
but there's no tax implications as they pull it out.
So just cannot suggest this enough. And then Finally, things
to be mindful of. Obviously Nate was talking about, there's

(27:51):
a lot more into these conversions than just your your
marginal income tax bracket. There's this concept of effective marginal
income tax brackets, and whether you're hitting Social Security what
are called tax torpedoes, and whether or not your conversions
are going to cause medicare penalties known as erma's. And finally,
require conversions get very difficult once you've reached required minimum

(28:13):
distribution age because r MD dollars cannot be converted to ROW.
So again, everybody, I hope your your eyes aren't, you know,
going into the back of your heads here. That's not
our goal. It's rather just to make you realize these
can be great, wonderful tools when used appropriately. So as

(28:33):
you move towards these topics, consider talking to a good
advisor or a good account.

Speaker 1 (28:37):
Great guidance as always from CJ. Class and Nate Briby.
They are our retirement planning professionals from Class Financial. You
can learn more about Class Financial on their website Class
financial dot com. That's coss k l a as Financial
dot com, teph upper for the office right here in
Madison six so eight four four two five six three seven.
No charge for that initial get to know you appointment.
Tech COSS Financial h will be complimentary to you again

(28:59):
the number six oh eight four four two five six
three seven. Come on to hold on to that telephone
number now because it's time four. The Class Quiz Question
of the Week works like this. In just a moment,
I'll ask you the class quiz question the week. You
will then have ten minute of thirty minutes for today's
program to call the Class Financial office right here in
Madison at six oh eight four four two five six
three seven. If you are the first gar correct answer
to win this week's prize, which is a twenty five

(29:20):
dollars gift card to Texas Roadhouse. This week's class Quiz
question the week is this true or false? There are
no income limits when contributing to a Wroth four oh
one K. Is that true or is that false? Telephone
number six oh eight four four two five six three seven,
And again that's Class Financial's office right here in Madison. CJ. Nate,
you both have a very merry Christmas, and thank you

(29:42):
for doing the show and we'll talk real soon.

Speaker 3 (29:44):
Thanks Sean, Thanks Sean, take care, see you guys.

Speaker 1 (29:46):
News and doctor Marty Greer. Come your way next right
here on thirteen ten wib I. This is Money in
Motion with COSS Financial Asset Advisors, LLC, a registered investment
advisor registered with the SEC. The contents of this show
or for informational purposes only, and should not be considered
individual investment advice. Class Financial does not offer tax or

(30:07):
legal advice. Any opinion offered during the course of this
show is the opinion of that particular investment advisor representative,
and not necessarily the opinion of Class Financial News. Comes
your way next right here on thirteen ten WIBA