You have questions, Tom has answers! Send us topics and questions at or email us at asktom@talkmoneywithtom.com Visit Our Website: To book an introductory meeting with Tom: Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California. DISCLAIMER: The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Tom Vaughan and Retirement Capital Strategies are not responsible for investment actions taken by viewers. For more details, please read our full disclaimer at #investmentincome #retirementplanning #retirementsavings #retirementgoals #investmentstrategy #talkmoneywithtom #investing #successfulretirement #wealthbuilding #finance #stockmarketnews #rothira #roth401k #rothconversion #traditionalorroth #taxfreeincome #taxdeferredincome #taxableincome #taxfreeassets #taxplanning #montecarlosimulation 0:00 Intro 0:57 Roth Grows Tax Free 2:20 Model Roth Conversion 4:20 Model Distribution Methods 7:40 Paying Taxes Efficiently When converting a traditional IRA to Roth IRA, why don't I use some of the funds in my traditional IRA to pay the taxes now and curve when, during that conversion? That's a really good question. And it is one of the difficulties of doing a conversion is that to really make it work, you need to have the money from outside the IRA. Let's just say that I want to move a 100K of my IRA and convert it into a Roth IRA. I'd want to do that because now the Roth IRA can go tax-free for the rest of my life. And when I pass away, my beneficiaries can get tax-free growth for 10 years, additionally, and so that's a huge deal. It's why I moved my accounts to Roth accounts. and you can do the math. There's all kinds of things to figure that out, but move a 100K. Let's just say, for example, you got 25K of taxes you have to pay because you moved that. If you reach into your IRA and pull out that 25,000 in tax to pay it. You're gonna have to take out more than 25 because that's also a taxable event. So maybe I have to pull out 40k to net 25k. So now I have just taken a $100K and moved it, but I lost $40K of assets inside of my IRA. Roughly, 40% of the move from one to another. So that $40K is no longer growing tax deferred in my IRA for the rest of my life is gone. It's out. And if you do the math, it doesn't work. If you take the money to pay the taxes out of the IRA to do the conversion, it does not work. You're better off just leaving the 100K in the IRA. One of the difficulties of doing these conversions actually have to have the money outside of your IRAs. And so, you know, often people do have money, but it's emergency money and things like that, that you wouldn't want to just get rid of to make the conversion. So the most successful scenarios for conversions are for people that have a IRA amounts in them. They have good home equity. And then they have money in taxable accounts and trust or individual counts or TOD (transfer on death) accounts. They're all taxable. That's where they can go in and take some of that. So they could take that 25,000 out of there. Some of it might be capital gains, but that's lower. Sometimes I can get that 25,000 out with very little tax. And so that works when you do the math, but you have to have that outside bucket of money. And this is one of the reasons I encourage people to really, really focus on where all of their money is within their retirement. It's incredibly important when we work on somebody, the healthiest financial situations, we deal with have money inside retirement plans and outside retirement plans, both. And so if you're not retired yet, or even if you are, are you still want to try to accumulate some assets outside your retirement plan. So it's just so much easier now, not everybody can do that. And I understand, and we have some strategies to try to work around that, but an ideal scenario, especially if you're younger and heading towards retirement is make sure you're putting some money in non-retirement things too. You know, you want to get your full match at your 401k. If you've got it, or, you know, those types of things, there's a bunch of really smart things, but have some money in some kind of liquid assets they could be in the stock market. It doesn't matter. It's as long as it's not fully taxable to get out, at ordinary income rates. And so placing everything you have inside these retirement plans, I think is a mistake, at least in an ideal scenario....(read more)
LEARN MORE ABOUT: IRA Accounts
INVESTING IN A GOLD IRA: Gold IRA Account
INVESTING IN A SILVER IRA: Silver IRA Account
REVEALED: Best Gold Backed IRA
Individual Retirement Accounts, or IRAs, are a popular way for individuals to save money for their retirement years. Traditional IRA accounts are tax-deferred, which means that the money you deposit into the account is deducted from your income for tax purposes in the year you make the contribution. Roth IRAs, on the other hand, are funded with after-tax dollars, meaning you pay taxes on contributions in the year you make them, but the money grows tax-free, and you can make qualified withdrawals tax-free. If you've been working and saving for years and now want to make the most of your retirement savings, you may be wondering whether converting your traditional IRA to a Roth IRA is the right financial move. The biggest benefit of converting to a Roth IRA is that, once you do, you won't have to pay any taxes on withdrawals made in retirement. However, the question is whether such conversions increase your nest egg, all things considered. To answer the question, it depends largely on your current and future tax rates, your age, your retirement goals, and other factors. Many financial professionals advise that if you expect your tax rate to be higher in retirement than it is now, then converting to a Roth IRA makes sense. This is because income tax rates may be higher, and because Roth IRAs are less complicated than traditional IRAs (they have no required minimum distributions) and offer more flexibility with respect to withdrawals. On the other hand, if you expect your tax rate to be lower in retirement than it is now, then converting to a Roth IRA may not be the best decision. This is because you would be paying taxes now on a higher rate on funds you may be able to use at a lower tax rate in retirement. Moreover, the downside of converting is that you are required to pay taxes on the conversion amount in the current year. That could leave you with a hefty tax bill to pay. One option to consider is converting to a Roth IRA gradually over time. Rather than converting all at once, which could result in high tax bills in one year, you could do this over several years spread out to reduce the overall tax burden. This approach could be more beneficial if you expect to have most of your income in retirement from sources other than your Roth IRA. However, it is vital to note that Roth IRA conversions are not a one-size-fits-all solution. Before making a final decision about whether or not to convert to a Roth IRA, consult with a financial planner, accountant, or tax professional who can help you understand the tax implications and how they will impact your retirement income. In conclusion, converting from a Traditional IRA to a Roth IRA may or may not make you end up with more money, depending on your tax situation and retirement plans. It's essential to take your time and explore all your options before making any final decisions about your IRA, as it can majorly impact the sum of money you retire on. https://inflationprotection.org/if-i-convert-my-traditional-ira-to-roth-ira-will-i-end-up-with-more-money/?feed_id=78436&_unique_id=64120d194a84d #Inflation #Retirement #GoldIRA #Wealth #Investing #backdoorrothira #generatewealthforretirement #howtoretiresuccessfully #requiredminimumdistribution #requiredminimumdistributions #Retirementgoals #retirementplanning #rothconversion #rothconversionstrategies #rothconversiontaxes #rothconversionsforretirement #RothIRA #rothiraconversion #rothiraconversion2022 #rothiraexplained #rothiravs401k #talkmoneywithtom #taxdeferredincome #taxfreeassets #taxfreeincome #TaxPlanning #TraditionalIRA #backdoorrothira #generatewealthforretirement #howtoretiresuccessfully #requiredminimumdistribution #requiredminimumdistributions #Retirementgoals #retirementplanning #rothconversion #rothconversionstrategies #rothconversiontaxes #rothconversionsforretirement #RothIRA #rothiraconversion #rothiraconversion2022 #rothiraexplained #rothiravs401k #talkmoneywithtom #taxdeferredincome #taxfreeassets #taxfreeincome #TaxPlanning
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