May 22, 2025 • 27 mins
#SafeMoney #JonHeischmanSr #RothIRAConversions
In this new episode, host Jon Heischman, Senior talks about Roth IRA conversions when moving into retirement.
Call Jon at (888) 426-0177 with questions, comments or to get a free copy of Top 10 IRA Mistakes and How to Avoid Tax Traps. Visit www.heischmanfs.com/ for additional information.
In this new episode, host Jon Heischman, Senior talks about Roth IRA conversions when moving into retirement.
Call Jon at (888) 426-0177 with questions, comments or to get a free copy of Top 10 IRA Mistakes and How to Avoid Tax Traps. Visit www.heischmanfs.com/ for additional information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
People really don't know what their expenses will because they
don't know how long that they're going to live.
Speaker 2 (00:06):
The Americans are worried they won't have enough safe for retirement.
Now more than ever, retirement's going to cost for many
folks over a million dollars.
Speaker 3 (00:14):
He is no short thing in investing, but a lot
of people think that annuities may come close to that.
It's going to more safe, safe, safe, safe things that
they know. If they know they're going to need that
money to supplement the retirement, well then you can't play
that rest. This is the Safe Money and Retirement Show.
But John Heischman Senior, Founder and partner of Heisman Financial
Services serving the Columbus and surrounding areas. John specializes in
(00:37):
educating pre retirees and retirees about safe money strategies and ideas.
Now it's the Safe Money and Retirement Show. Here's John Heischman, Senior.
Speaker 2 (00:48):
Good morning, and welcome to the Safe Money and Retirement Show.
I'm your host, John Heischmann. I'm glad you're joining me.
If your new to the show, first time tuning in.
My objective is to give retirement planning ideas to you
(01:11):
to work with you and help you to have a
better retirement. This morning, I'm going to talk about roth
i are a conversions, but before I get started, I
want to give you the number to call for additional
information or questions, or if you'd like to schedule a
(01:37):
no cost, no obligation meeting with me. That number is
eight eight eight four two six zero one seven seven
triple eight four to two six zero one seventy seven.
We can schedule a meeting at my office or even
(02:01):
your home, whatever is most convenient. All right, conversions over
to a roth ira. It's been pretty popular over the
last year or so because I think primarily tax rates
(02:21):
are low and that makes it attractive to convert, because
when you do convert, there's going to be tax that
has to be paid for the conversion amount, whether it's
a partial or if it's a full. So basically, a
(02:43):
traditional ira may be converted to a wroth ira with
no time or income restrictions. Pre tax dollars are subject
to ordinary income tax at the time of conversion, but
(03:03):
are not subject to the ten percent early withdrawal penalty
even if you're underage fifty nine and a half. If
a withdrawal of converted ira funds is made from the
(03:24):
time the rough account subsequent to the conversion, but before
five years has elapsed. Such a withdrawal is subject to
a ten percent penalty. Why would someone want to convert
(03:44):
to a roth because they're going to have tax free
income sometime during retirement, But you don't want to and
you can't convert to a roth ira and then turn
around after the contract is issued and start withdrawing money.
(04:07):
There's that five year time period. So really the younger
you convert, the better because it's money that you shouldn't
need until retirement or later in retirement. So assets may
(04:28):
be converted to a rough ira from that traditional ira,
an SEP or a simple and qualified plans. The ability
to convert is not restricted by age. Anyone can convert
(04:49):
to a roth at any time. If non deductible IRA
contributions are involved, then a ratio of none undeductible IRA
contributions to the total value of all iras must be used.
(05:09):
In other words, what I mean by that one cannot
just convert the non deductible contribution amounts. There is no
ten percent penalty tax on conversions if you're under age
fifty nine and a half, so should you convert all
(05:31):
or maybe just a portion of that traditional IRA to
a rough IRA. When I have a meeting with a
client or a potential client, the first thing we have
to look at, should you convert? Is it in your
(05:52):
best interest? What is the estimated cost going to be
for that conversion? In other words, if you're in the
twenty percent tax bracket, let's say, how much is it
going to cost you to convert to a roth ira?
(06:12):
Because that's what it's going to cost you. And I
think that's the big reason that everyone doesn't convert to
a wroth is because of that tax bill. It's going
to put you in a higher tax bracket potentially. But
(06:34):
that's what we have to look at, and there's been situations.
As a matter of fact, last year, I recommended to
a potential client not to convert, but she wanted to
convert part of her IRA, so we figured what the
(06:56):
potential tax was going to be. Is it going to
put her in a higher tax bracket? Then determine the
amount of a partial conversion, because a lot of individuals
will convert twenty percent per year for five years, for example,
to lessen the tax burden, and typically that might be
(07:20):
somebody in their late fifties or early sixties and they're
not going to retire until mid or late sixties. But again,
when the time comes that you can withdraw that money,
it's tax free. That's the advantage. Oh and also roth
(07:44):
IRA money going to a beneficiary is non taxed as well.
And of course we want to consider whether the client
has the cash to pay the tax that's going to
result from the conversion, or if they will have to
(08:05):
liquidate another account and possibly incur a ten percent early
withdrawal penalty or maybe even a transfer fee. Those with
a lot of cash and can afford to pay the
tax that's going to come due at the end of
the year that you convert is usually the best way.
(08:28):
And also along with that, I like to explore other
opportunities to help lower your AGI for that year. And
some of these possibilities could include increasing contributions to a
qualified plan or bunching meaning itemize deductions from surrounding years,
(08:54):
taking capital losses and contributing to a health savings out
or even a flexible spending account. Today, there are several
companies that will offer an interest bonus if you convert
(09:16):
over to one of their roth IRA plans. In many
cases that interest bonus that you're going to receive will
be equal to the tax or help to cover the
tax for the conversion. And I have a lot of
(09:37):
people that are taking advantage of that because that bonus
helps to cover the tax that needs to be paid.
But we have to keep in mind that's only if
it works for them, if that's in their best interest.
You have to look at what are you going to
(09:58):
convert to. What I we try and do is look
at both options. If you're going to convert, should you
convert to the IRA that you already have, meaning you
have an IRA you want to convert to a RATH.
Should you convert the funds from your existing IRA or
(10:20):
should you open up a new account with your current
advisor or another advisor using the converted funds? Again, which
is best? That's what we have to look at. That's
what I want to focus on, show you the options
(10:40):
and what's best for you. Eight eight eight four two
six zero one seventy seven. That's the number to reach me,
no cost, no obligation. I just welcome the opportunity to
be able to help you. If you become a client, great,
if not, but that's fine too. We had the opportunity
(11:03):
to meet and hopefully I've been able to help you
eight eight eight four two six zero one seventy seven.
For those of you that would like some information possibly
get more educated study the strategy of ROTH conversions. I
(11:26):
do have information that is very consumer friendly, and I'd
be happy to get that information to you, and I
think it will help you to kind of make that
decision if you're thinking about doing it, and we want
to keep in mind and think about number one, the
(11:47):
taxes that it's going to cost for the conversion, and
compare that to the taxes you're going to save from
taking a tax free income for ten years, fifteen years,
or twenty years, and usually it's definitely going to work
(12:08):
out better to do the conversion and receive a tax
free income, which in retirement we all wish our income
was tax free or tax advantaged because the income that's
going to come and you have to take at least
the required minimum distribution from that traditional IRA, that's all
(12:32):
taxed and it's taxable to your beneficiary. I'm going to
take a short break at this point, and when I return,
I'll continue my discussion on roth IRA conversions. In the meantime,
write this number down. It's available for you to call
(12:53):
twenty four to seven eight eight eight four two six
zero one seven seven. I'll be right back.
Speaker 1 (13:11):
Avoiding mistakes can save owners of iras four oh one
KS and TSP plans, as well as other retirement plans
a fortune in taxes.
Speaker 4 (13:27):
Penalties, fees and loads. These potential mistakes are addressed in
the free book entitled Top ten IRA Mistakes. This is
John Heischmann from the Safe Money and Retirement Show offering
a complimentary copy by calling eight eight eight four to
(13:49):
two six zero one seven seven again that's triple eight
four two six zero one seven seven.
Speaker 5 (14:09):
Welcome back to the Safe Money and Retirement Show with
John Heisman. To contact John, the number to call is
one eight eight eight or two six zero one seven seven.
That's one eight eight eight or two six zero one
seven seven. Once again, here's John Heisman.
Speaker 2 (14:26):
I was discussing roth IRA conversions. It may be a
good idea for you or it may not. And as
I mentioned earlier in the show, it's something you need
to look into and see if it's going to work
for you. And based on the fact there's no cost
(14:50):
or obligation. It makes it more beneficial for you to
investigate those possibilities. I want to kind of to go
back to the advantage of the roth ira. Whether you're
thinking about starting one, or you're going to convert a
(15:12):
traditional ira over to a wroth and continue to make
contributions to that converted wroth. The main advantage of the
roth ira lies in the tax free treatment of distributions,
and this is for the owner and the beneficiary. There
(15:34):
is no deduction available for contributions to a roth ira.
All contributions are made with after tax dollars. I have
a lot of clients that have both a traditional and
a wroth. Most of them have done a roth conversion.
(15:55):
Others have started from scratch, but they do have an advantage.
From the standpoint. There are options, especially if they're in
a position where their income varies. Their tax situation could
be different in any given year. For example, in the
(16:18):
year where the deduction is needed, contributions to the traditional
ira would make sense. On the other hand, in a
year where the deduction isn't needed, estimated taxes are going
to be low, make that contribution to a roth. But
(16:39):
in any event, in this case, there's options to cover
each situation. Additional things to think about would be eligibility
and for example, in twenty twenty three, those individuals filing
as single taxpayers with modified adjusted gross income up to
(17:02):
one hundred and fifty three thousand dollars and married filers
with modified adjusted gross income up to two hundred and
twenty eight thousand are eligible to contribute to a roth ira.
Those income limits will cover the majority of individuals within
(17:24):
that income range. Another reason I like the roth ira.
Unlike traditional iras, where distributions must start when the individual
turns seventy three, roth iras are not subject to mandatory
required minimum distribution rules. Major advantage of roth iras Those
(17:52):
that have roth iras and traditional iras will now have
the option to delay taking income from their traditional iras
until age seventy three because they have the option to
take the income from the wroth iras. When I do
(18:16):
an income plan and a client is in that situation
where they do have both, it creates more flexibility as
to when do they take income from which account, and
of course that's based on their tax situation each year.
I like to have the ability to adjust, but in
(18:39):
any event, at age seventy three. Those traditional ira plans,
the minimum must be paid out. There is no choice.
If there's no wroth ira, then obviously we don't have
that flexibility. But those in retirement or getting ready to retire,
(19:00):
I really think that you at least should have a
discussion with your planner about a roth ira and would
a conversion to a roth ira be in your best interest.
If you want a second opinion, or you're not working
(19:21):
with a retirement planner, give me a call. We'll discuss
your situation. Eight eight eight four two six zero one
seven seven at number again is triple eight four to
two six zero one seventy seven. I want to talk
(19:43):
about when does establishing a roth ira make sense. It
can be advantageous for a number of people with earned income,
including individuals who believe their c tax rates are lower
than what they're going to be in the future. A
(20:07):
couple of examples. Let's take a young person in an
early level job, because chances are this person is going
to be in the twelve percent tax bracket, give or
take a couple percentages due to their modest earnings. If
their career progresses, this bracket could be up to twenty
(20:31):
four to thirty two percent in some cases higher. They
may prefer to pay taxes on the funds contributed now
and receive a tax free income later. How about anyone
who suspects that the tax rates may change for the
(20:52):
worst in the future. US tax rates for middle and
upper income earners are low when compared to the rates
that we saw back in the nineteen sixties and nineteen seventies,
So it just depends on future tax rates. But in
(21:13):
any event, whatever that rate is going to be, we
must keep in mind that ultimate benefit of a tax
free income. Another advantage would be an individual that is
going to save for their first home. First time homeowners
(21:33):
the unique ability to make an early distribution without a
penalty mixer roth ira an even more attractive plan for
accumulating a down payment. Another situation would be individuals wanting
to pass on assets tax free to their beneficiaries. In
(21:57):
many cases that I've seen has a tendency to be
more important for somebody in that situation than the conversion
tax that would apply for converting to a roth ira,
because we need to keep in mind I think the
majority of money is what we call qualified money, that
(22:22):
is iras four to oh one k's four H three
b's retirement accounts that have been rolled over too traditional iras,
And if you have a four to oh one K,
for example, and it didn't have a wroth option, it
has to go into an IRA. So my point being,
(22:45):
majority of the people, the majority of their money is
qualified passing on to beneficiaries. They're the ones that will
pay the tax on inheriting that qualified money. Therefore, if
you inherit a roth ira and the five year holding
(23:07):
period requirement is met, beneficiaries of the account can still
receive tax free distributions. Now, it's not unusual for me
to see a situation where there are multiple traditional iras,
and I'm sure many of you listening to this show
(23:29):
have two or more traditional iras. If you're in that situation,
consider converting one of those or part of one of those.
Because the factors to consider when establishing a wroth or
carrying out a wroth conversion, it's going to vary depending
(23:54):
on the individual. I can't stress that enough. The numbers
have to be run. The overall picture of each individual,
what other accounts do they have, has to be taken
into consideration when you do a wroth conversion. So it's
not like, Hey, let's just convert to wroth and pay
(24:17):
the tax and have the tax free income later on.
Speaker 1 (24:22):
The need for.
Speaker 2 (24:23):
Tax diversification within the retirement plan could very well include
a roth ira wroth distributions. They're not counted for Social
Security taxation or determining Medicare premiums. Very important thing to
(24:45):
take into consideration. In summary, several points I want to
make about wroth conversions. First, assets may be converted to
a roth ira from traditional iras and other qualified plans.
(25:05):
The ability to convert is not restricted by age. Anyone
can convert to a wroth at any age. There is
no ten percent penalty tax on conversions if you're under
age fifty nine and a half. I hope I've given
(25:27):
you some ideas something to think about for those that
a roth conversion may be beneficial, but once again you
need to find out isn't going to be good for
your situation, both now and in the future. Let me
know how I can help or if you'd like more
(25:49):
information about the roth conversion eight eight eight four two
six zero one seven seven. And I appreciate you take
the time this morning to listen to the Safe Money
and Retirement Show. I look forward to hearing from you
and hope that you'll join me next week at the
(26:11):
same time and the same stations. This is John Heischman,
your host. Be safe and enjoy the rest of your weekend.
Speaker 3 (26:21):
The Safe Money and Retirement Joe, John Heisman Senior. To
get in touch with John, call one AA eight four
two six zero one seven seven. That's one triple eight
four two six zero one seven seven. For more information
about Heisman Financial Services, visit their website Heisman fs dot com.
(26:42):
That's h E I S C H M A n
F S dot com. Join us again next time for
the Safe Money and Retirement Joe with John Heisman Senior
People really don't know what their expenses will because they
don't know how long that they're going to live.
Speaker 2 (00:06):
The Americans are worried they won't have enough safe for retirement.
Now more than ever, retirement's going to cost for many
folks over a million dollars.
Speaker 3 (00:14):
He is no short thing in investing, but a lot
of people think that annuities may come close to that.
It's going to more safe, safe, safe, safe things that
they know. If they know they're going to need that
money to supplement the retirement, well then you can't play
that rest. This is the Safe Money and Retirement Show.
But John Heischman Senior, Founder and partner of Heisman Financial
Services serving the Columbus and surrounding areas. John specializes in
(00:37):
educating pre retirees and retirees about safe money strategies and ideas.
Now it's the Safe Money and Retirement Show. Here's John Heischman, Senior.
Speaker 2 (00:48):
Good morning, and welcome to the Safe Money and Retirement Show.
I'm your host, John Heischmann. I'm glad you're joining me.
If your new to the show, first time tuning in.
My objective is to give retirement planning ideas to you
(01:11):
to work with you and help you to have a
better retirement. This morning, I'm going to talk about roth
i are a conversions, but before I get started, I
want to give you the number to call for additional
information or questions, or if you'd like to schedule a
(01:37):
no cost, no obligation meeting with me. That number is
eight eight eight four two six zero one seven seven
triple eight four to two six zero one seventy seven.
We can schedule a meeting at my office or even
(02:01):
your home, whatever is most convenient. All right, conversions over
to a roth ira. It's been pretty popular over the
last year or so because I think primarily tax rates
(02:21):
are low and that makes it attractive to convert, because
when you do convert, there's going to be tax that
has to be paid for the conversion amount, whether it's
a partial or if it's a full. So basically, a
(02:43):
traditional ira may be converted to a wroth ira with
no time or income restrictions. Pre tax dollars are subject
to ordinary income tax at the time of conversion, but
(03:03):
are not subject to the ten percent early withdrawal penalty
even if you're underage fifty nine and a half. If
a withdrawal of converted ira funds is made from the
(03:24):
time the rough account subsequent to the conversion, but before
five years has elapsed. Such a withdrawal is subject to
a ten percent penalty. Why would someone want to convert
(03:44):
to a roth because they're going to have tax free
income sometime during retirement, But you don't want to and
you can't convert to a roth ira and then turn
around after the contract is issued and start withdrawing money.
(04:07):
There's that five year time period. So really the younger
you convert, the better because it's money that you shouldn't
need until retirement or later in retirement. So assets may
(04:28):
be converted to a rough ira from that traditional ira,
an SEP or a simple and qualified plans. The ability
to convert is not restricted by age. Anyone can convert
(04:49):
to a roth at any time. If non deductible IRA
contributions are involved, then a ratio of none undeductible IRA
contributions to the total value of all iras must be used.
(05:09):
In other words, what I mean by that one cannot
just convert the non deductible contribution amounts. There is no
ten percent penalty tax on conversions if you're under age
fifty nine and a half, so should you convert all
(05:31):
or maybe just a portion of that traditional IRA to
a rough IRA. When I have a meeting with a
client or a potential client, the first thing we have
to look at, should you convert? Is it in your
(05:52):
best interest? What is the estimated cost going to be
for that conversion? In other words, if you're in the
twenty percent tax bracket, let's say, how much is it
going to cost you to convert to a roth ira?
(06:12):
Because that's what it's going to cost you. And I
think that's the big reason that everyone doesn't convert to
a wroth is because of that tax bill. It's going
to put you in a higher tax bracket potentially. But
(06:34):
that's what we have to look at, and there's been situations.
As a matter of fact, last year, I recommended to
a potential client not to convert, but she wanted to
convert part of her IRA, so we figured what the
(06:56):
potential tax was going to be. Is it going to
put her in a higher tax bracket? Then determine the
amount of a partial conversion, because a lot of individuals
will convert twenty percent per year for five years, for example,
to lessen the tax burden, and typically that might be
(07:20):
somebody in their late fifties or early sixties and they're
not going to retire until mid or late sixties. But again,
when the time comes that you can withdraw that money,
it's tax free. That's the advantage. Oh and also roth
(07:44):
IRA money going to a beneficiary is non taxed as well.
And of course we want to consider whether the client
has the cash to pay the tax that's going to
result from the conversion, or if they will have to
(08:05):
liquidate another account and possibly incur a ten percent early
withdrawal penalty or maybe even a transfer fee. Those with
a lot of cash and can afford to pay the
tax that's going to come due at the end of
the year that you convert is usually the best way.
(08:28):
And also along with that, I like to explore other
opportunities to help lower your AGI for that year. And
some of these possibilities could include increasing contributions to a
qualified plan or bunching meaning itemize deductions from surrounding years,
(08:54):
taking capital losses and contributing to a health savings out
or even a flexible spending account. Today, there are several
companies that will offer an interest bonus if you convert
(09:16):
over to one of their roth IRA plans. In many
cases that interest bonus that you're going to receive will
be equal to the tax or help to cover the
tax for the conversion. And I have a lot of
(09:37):
people that are taking advantage of that because that bonus
helps to cover the tax that needs to be paid.
But we have to keep in mind that's only if
it works for them, if that's in their best interest.
You have to look at what are you going to
(09:58):
convert to. What I we try and do is look
at both options. If you're going to convert, should you
convert to the IRA that you already have, meaning you
have an IRA you want to convert to a RATH.
Should you convert the funds from your existing IRA or
(10:20):
should you open up a new account with your current
advisor or another advisor using the converted funds? Again, which
is best? That's what we have to look at. That's
what I want to focus on, show you the options
(10:40):
and what's best for you. Eight eight eight four two
six zero one seventy seven. That's the number to reach me,
no cost, no obligation. I just welcome the opportunity to
be able to help you. If you become a client, great,
if not, but that's fine too. We had the opportunity
(11:03):
to meet and hopefully I've been able to help you
eight eight eight four two six zero one seventy seven.
For those of you that would like some information possibly
get more educated study the strategy of ROTH conversions. I
(11:26):
do have information that is very consumer friendly, and I'd
be happy to get that information to you, and I
think it will help you to kind of make that
decision if you're thinking about doing it, and we want
to keep in mind and think about number one, the
(11:47):
taxes that it's going to cost for the conversion, and
compare that to the taxes you're going to save from
taking a tax free income for ten years, fifteen years,
or twenty years, and usually it's definitely going to work
(12:08):
out better to do the conversion and receive a tax
free income, which in retirement we all wish our income
was tax free or tax advantaged because the income that's
going to come and you have to take at least
the required minimum distribution from that traditional IRA, that's all
(12:32):
taxed and it's taxable to your beneficiary. I'm going to
take a short break at this point, and when I return,
I'll continue my discussion on roth IRA conversions. In the meantime,
write this number down. It's available for you to call
(12:53):
twenty four to seven eight eight eight four two six
zero one seven seven. I'll be right back.
Speaker 1 (13:11):
Avoiding mistakes can save owners of iras four oh one
KS and TSP plans, as well as other retirement plans
a fortune in taxes.
Speaker 4 (13:27):
Penalties, fees and loads. These potential mistakes are addressed in
the free book entitled Top ten IRA Mistakes. This is
John Heischmann from the Safe Money and Retirement Show offering
a complimentary copy by calling eight eight eight four to
(13:49):
two six zero one seven seven again that's triple eight
four two six zero one seven seven.
Speaker 5 (14:09):
Welcome back to the Safe Money and Retirement Show with
John Heisman. To contact John, the number to call is
one eight eight eight or two six zero one seven seven.
That's one eight eight eight or two six zero one
seven seven. Once again, here's John Heisman.
Speaker 2 (14:26):
I was discussing roth IRA conversions. It may be a
good idea for you or it may not. And as
I mentioned earlier in the show, it's something you need
to look into and see if it's going to work
for you. And based on the fact there's no cost
(14:50):
or obligation. It makes it more beneficial for you to
investigate those possibilities. I want to kind of to go
back to the advantage of the roth ira. Whether you're
thinking about starting one, or you're going to convert a
(15:12):
traditional ira over to a wroth and continue to make
contributions to that converted wroth. The main advantage of the
roth ira lies in the tax free treatment of distributions,
and this is for the owner and the beneficiary. There
(15:34):
is no deduction available for contributions to a roth ira.
All contributions are made with after tax dollars. I have
a lot of clients that have both a traditional and
a wroth. Most of them have done a roth conversion.
(15:55):
Others have started from scratch, but they do have an advantage.
From the standpoint. There are options, especially if they're in
a position where their income varies. Their tax situation could
be different in any given year. For example, in the
(16:18):
year where the deduction is needed, contributions to the traditional
ira would make sense. On the other hand, in a
year where the deduction isn't needed, estimated taxes are going
to be low, make that contribution to a roth. But
(16:39):
in any event, in this case, there's options to cover
each situation. Additional things to think about would be eligibility
and for example, in twenty twenty three, those individuals filing
as single taxpayers with modified adjusted gross income up to
(17:02):
one hundred and fifty three thousand dollars and married filers
with modified adjusted gross income up to two hundred and
twenty eight thousand are eligible to contribute to a roth ira.
Those income limits will cover the majority of individuals within
(17:24):
that income range. Another reason I like the roth ira.
Unlike traditional iras, where distributions must start when the individual
turns seventy three, roth iras are not subject to mandatory
required minimum distribution rules. Major advantage of roth iras Those
(17:52):
that have roth iras and traditional iras will now have
the option to delay taking income from their traditional iras
until age seventy three because they have the option to
take the income from the wroth iras. When I do
(18:16):
an income plan and a client is in that situation
where they do have both, it creates more flexibility as
to when do they take income from which account, and
of course that's based on their tax situation each year.
I like to have the ability to adjust, but in
(18:39):
any event, at age seventy three. Those traditional ira plans,
the minimum must be paid out. There is no choice.
If there's no wroth ira, then obviously we don't have
that flexibility. But those in retirement or getting ready to retire,
(19:00):
I really think that you at least should have a
discussion with your planner about a roth ira and would
a conversion to a roth ira be in your best interest.
If you want a second opinion, or you're not working
(19:21):
with a retirement planner, give me a call. We'll discuss
your situation. Eight eight eight four two six zero one
seven seven at number again is triple eight four to
two six zero one seventy seven. I want to talk
(19:43):
about when does establishing a roth ira make sense. It
can be advantageous for a number of people with earned income,
including individuals who believe their c tax rates are lower
than what they're going to be in the future. A
(20:07):
couple of examples. Let's take a young person in an
early level job, because chances are this person is going
to be in the twelve percent tax bracket, give or
take a couple percentages due to their modest earnings. If
their career progresses, this bracket could be up to twenty
(20:31):
four to thirty two percent in some cases higher. They
may prefer to pay taxes on the funds contributed now
and receive a tax free income later. How about anyone
who suspects that the tax rates may change for the
(20:52):
worst in the future. US tax rates for middle and
upper income earners are low when compared to the rates
that we saw back in the nineteen sixties and nineteen seventies,
So it just depends on future tax rates. But in
(21:13):
any event, whatever that rate is going to be, we
must keep in mind that ultimate benefit of a tax
free income. Another advantage would be an individual that is
going to save for their first home. First time homeowners
(21:33):
the unique ability to make an early distribution without a
penalty mixer roth ira an even more attractive plan for
accumulating a down payment. Another situation would be individuals wanting
to pass on assets tax free to their beneficiaries. In
(21:57):
many cases that I've seen has a tendency to be
more important for somebody in that situation than the conversion
tax that would apply for converting to a roth ira,
because we need to keep in mind I think the
majority of money is what we call qualified money, that
(22:22):
is iras four to oh one k's four H three
b's retirement accounts that have been rolled over too traditional iras,
And if you have a four to oh one K,
for example, and it didn't have a wroth option, it
has to go into an IRA. So my point being,
(22:45):
majority of the people, the majority of their money is
qualified passing on to beneficiaries. They're the ones that will
pay the tax on inheriting that qualified money. Therefore, if
you inherit a roth ira and the five year holding
(23:07):
period requirement is met, beneficiaries of the account can still
receive tax free distributions. Now, it's not unusual for me
to see a situation where there are multiple traditional iras,
and I'm sure many of you listening to this show
(23:29):
have two or more traditional iras. If you're in that situation,
consider converting one of those or part of one of those.
Because the factors to consider when establishing a wroth or
carrying out a wroth conversion, it's going to vary depending
(23:54):
on the individual. I can't stress that enough. The numbers
have to be run. The overall picture of each individual,
what other accounts do they have, has to be taken
into consideration when you do a wroth conversion. So it's
not like, Hey, let's just convert to wroth and pay
(24:17):
the tax and have the tax free income later on.
Speaker 1 (24:22):
The need for.
Speaker 2 (24:23):
Tax diversification within the retirement plan could very well include
a roth ira wroth distributions. They're not counted for Social
Security taxation or determining Medicare premiums. Very important thing to
(24:45):
take into consideration. In summary, several points I want to
make about wroth conversions. First, assets may be converted to
a roth ira from traditional iras and other qualified plans.
(25:05):
The ability to convert is not restricted by age. Anyone
can convert to a wroth at any age. There is
no ten percent penalty tax on conversions if you're under
age fifty nine and a half. I hope I've given
(25:27):
you some ideas something to think about for those that
a roth conversion may be beneficial, but once again you
need to find out isn't going to be good for
your situation, both now and in the future. Let me
know how I can help or if you'd like more
(25:49):
information about the roth conversion eight eight eight four two
six zero one seven seven. And I appreciate you take
the time this morning to listen to the Safe Money
and Retirement Show. I look forward to hearing from you
and hope that you'll join me next week at the
(26:11):
same time and the same stations. This is John Heischman,
your host. Be safe and enjoy the rest of your weekend.
Speaker 3 (26:21):
The Safe Money and Retirement Joe, John Heisman Senior. To
get in touch with John, call one AA eight four
two six zero one seven seven. That's one triple eight
four two six zero one seven seven. For more information
about Heisman Financial Services, visit their website Heisman fs dot com.
(26:42):
That's h E I S C H M A n
F S dot com. Join us again next time for
the Safe Money and Retirement Joe with John Heisman Senior
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
NFL Daily with Gregg Rosenthal
Gregg Rosenthal and a rotating crew of elite NFL Media co-hosts, including Patrick Claybon, Colleen Wolfe, Steve Wyche, Nick Shook and Jourdan Rodrigue of The Athletic get you caught up daily on all the NFL news and analysis you need to be smarter and funnier than your friends.