Episode summary
Roth Conversions and RMDs: Are You Ready to Retire?
Your Money Your Wealth
· · 34 min · Hosts: Joe Anderson, Big Al Clopine
Summary
The episode centered on three listener retirement cases and how Roth conversions, taxes, and future income streams change the answer to “can I retire yet?” For B and S in Maryland, the hosts ran a back-of-the-envelope retirement projection using current assets, expected savings, rental income, and Social Security. Their conclusion was that the couple is close, but only if they keep spending under control and continue building savings; the retirement date looked more realistic around age 62 than immediately.
For V in Oregon, the hosts were more bullish. With about $3.7 million in assets, modest annual spending, and years before RMDs, they said the conversion plan is broadly sound and that the couple should consider converting more aggressively while they are still in a lower bracket. They also argued that if the market drops, that can be a good time to convert more, since future growth would then happen inside the Roth.
The final question, from Chandler and Monica in Texas, was even more favorable. With about $1.4 million today, a pension beginning at 65, and relatively modest spending, the hosts said the couple looks on track to retire in three years. They emphasized that the real planning issue is not survival, but how to manage the tax bill efficiently before Social Security and pension income arrive.
Key takeaways
- B and S may be close to retirement at 62, but the hosts said they likely need either lower spending or higher savings to make the math work.
- The hosts assumed B and S could be short roughly $156,000 a year in retirement after inflation, rental income, and Social Security were factored in.
- For V in Oregon, the hosts called the Roth conversion plan solid and favored converting more while the couple is in the 22% bracket.
- The hosts said V should consider accelerating Roth conversions if the market falls, because discounted assets could be moved into the Roth more efficiently.
- For Chandler and Monica, the hosts said a 3-year retirement window looks realistic because fixed income appears likely to cover most or all spending.
- The hosts repeatedly framed Roth conversions as a long-term tax problem management tool, especially before RMDs and later single-filer tax brackets hit.
Notable quotes
“I would go 100% Roth on this case because I'm I'm guessing the $88,000 draw from his business has very little tax on it”
“It's a great plan. That I mean, you look at I looked at 108,000 of spending”
“if the market goes down 10%, I'm going to convert. Well, then I about Irma if the market goes down 10%”
“I think I would do the same. Uh that just gives you more time to convert and then control kind of the taxes long term”
How the episode opens
B and S in Maryland are in their mid-40s with $425,000 and a couple of rental properties. Can they retire early at age 62? V in Oregon came to the US as a refugee with nothing and built a 3 and 3/4 million-dollar portfolio from the ground up.
Is his Roth conversion plan solid? And finally, Chandler and Monica in Texas are sitting on $1.4 million and hope they can walk away from work in 3 years. Will Roth conversions keep the taxman from taking a giant bite on their way out?
That's all today on Your Money, Your Wealth podcast number 591. And if you're one of the 47 and 1/2% of people who watch us on YouTube but haven't subscribed yet, please do. It means more people see us making fun of finance and it'll bring more people to have fun with us in the comments, too.
I'm executive producer Andy Last and here are the hosts of Your Money, Your Wealth, Joe Anderson CFP and Big Al Clopine CPA.
Retirement analysis, spinball, please. And Thank you. Wondering when I would be able to retire, how much to plan for covering the gap, should I backdoor any of my 401k, and what would we change if anything. We are B and S from Westminster, Maryland. So, let's hear that quickly.
Said it perfectly. — All right. They got three kids in middle school, high school. I'm S. I'm 43, corporate project manager, desk pilot. — A — A desk pilot. — Never heard that term, but like it. — It would like to retire as soon as the house is paid off or as soon as possible. Hubs, B, is 45, half business owner of a vehicle restoration business and will likely work full-time until retirement and then switch to part-time or a hobbyist uh to stay busy.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- roth conversions
- rmds
- retirement planning
- tax strategy
- early retirement
Companies and tickers mentioned
- Pure Financial Advisors, LLC
Watch the episode
Watch “Roth Conversions and RMDs: Are You Ready to Retire?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Is a $400K Roth Conversion at Peak Income a Mistake? -
Should You Do Roth Conversions in a Down Market?
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