I'm 63 And Retired With $2,000,000 In My 401(k) Should I Convert To A Roth IRA
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Published 2023-02-15
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Would a Roth Conversion improve my tax efficiency? What happens if I run out of income before I run out of life? Will my spouse be ok? In this study, we'll take a look at being 63 and retired with $2,000,000 in your 401(k). Should you convert to a Roth IRA?
0:15 Introduction
0:45 Disclaimer
1:20 Case Study
1:45 Plan for Everything
2:16 Current Situation
3:26 Roth Conversions
5:24 401(k) vs Roth IRA
9:45 Tax Brackets
11:37 Impact of RMDs
12:52 Starting Distribution Tax
14:27 How Much to Convert?
15:28 Medicare Part B
17:06 Conclusion
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#incomeplanning #retirementplanning #retirementincome #retirewith2M #retirementat63 #retiredandmarried
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Investment advisory services offered through Blue Ridge Wealth Planners, an SEC Registered Investment Advisor. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.
Blue Ridge Wealth Planners does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Actual results will fluctuate with market conditions and will vary over time.
Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
Blue Ridge Wealth Planners is an investment advisory firm, and not an accounting firm. Viewers are encouraged to consult with a tax professional to assist them with their specific tax situation. This video is for informational purposes only and should not be considered as tailored financial or tax advice. Viewers should consult with a financial services professional to assist them with their investment and financial planning questions.
All Comments (21)
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UPDATE: After this video was recorded, The SECURE 2.0 Act passed, raising the RMD age from 72 to 73 years. This means this plan would benefit from an additional year of growth before required distributions begin.
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Great video. We are all seeking for financial independence and a better way of life. This is not difficult to achieve with savvy investing, a frugal lifestyle, and cautious budgeting. I'm glad I learned early on to work hard for financial independence. As Warren Buffet said, he has seen this happen many times in his life. Not an investor, My husband and i never earned more than a middle class salary. We plan to get retired at 58 with a stock portfolio worth $1.7M. We have never sold so much as one share of stock.
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I used 401k to get the match, then increased it every time I got a raise. I also saved any spare money on the side.Drove used cars lived below my means, bought a couple of modest rentals and retired at 56. I lived on savings and rental income, and a few years fell into the "poverty bracket" for taxes purposes.. I converted to 401k to roth during the "low income" years. Reached FRA this year and started SS . 95% of my funds are now in roth..... The key to success is keep your butt out of debt and know the difference between wants and needs.
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Great info! When Roth IRA's were 1st available (1997) we had 400k in Traditional IRA's and 401K's. Wanted to do a conversion of the whole amount, had cash to pay the tax. Neither our CPA or the IRS could tell me what my tax would be, chased that for 2 years, Nobody knew, frustration! All Roth from that point except the 401K, employer wouldn't offer it. Now we're retired and have been using this same theory converting 50k a year for 6 years to Roth at a 20% tax rate. It just make sense. If you can do it, don't hesitate!
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We are you in the same situation. Thank you so much for this video! It answered all my questions.❤
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When I was 60, I formed a Ranch, LLC, built a retirement home with a cattle business. Net business loss of $4 million USD and converted my IRA/401K and wife's to ROTH IRA using NET loss. Since the Ranch LLC is agriculture the depreciation of equipment and business expenses can be a paper loss while building a future business and retirement home.
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Amazing explanation! You are the best!
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Very thorough, thank you for sharing!
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at 16:00 priceless information regarding Medicare premium wow thank you
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Move to a rollover IRA. You can then use it to control your investments as you see fit. If market crashes you can exit it and still have cash to live on. This is the best way to manage your money the way you see fit. Make sure you spend time studying and understanding all the investment options available to you. Also recommend simplifying and finding ways to cut down on your living expenses.
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Great analysis
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Very good explanation!! Thanks
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This was excellent - thank you!
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Love that you used a whiteboard to explain, great level of detail.
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An additional option is to only do your charitable contributions via QCD UP TO 100 K PER YEAR IE DON'T PAY TITHING OUT OF A TAXABLE ACCT
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Great Information very deatiled this help all of us to make sure our money guy is really doing his job
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I’m being bombarded by Financial Salesmen to convert my 401k to Roth. I am not a believer that our tax code will significantly change for those of us not in the top quartile, so I ignore all these folks with their funny math. You did a great job here to explain all the considerations for this approach . . . . and now I will look at it a little bit harder to make sure I’m comfortable with my position going forward. Your balanced approach is the best version I’ve seen to truly consider Roth conversion.
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Very good info
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It would be interesting to know what the median balance in retirement accounts both Roth and traditional is in 2024? Next it would be interesting to know what the median withdrawal amount that was taken from those accounts last year? I would think that withdrawal amounts are not very large and would have small tax liability. The average 401k balance in 2022 was $112,572 dollars that tells me the median would be much lower. If you took the average and applied the 4% rule on withdrawal you would be taking out just over $4,500 dollars annually. Even if you doubled the average you’re still looking at under $10,000 in withdrawals… 🤔🤔🤔
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when you do the how much to convert don't forget to add in their social security and pension income etc. Also Irma and medicare premiums should be factored.
