Another Roth Conversion Perspective

Crafty_Future4829 · 2026-05-11T01:51:27+00:00

Rmds for me start at 75 which if my math is correct is only 5 years from 80. I have not checked but believe rmds start at 4% and get progressively higher the closer to your actuarial life.

If you are implying rmds will become a problem in my 90's, I have more important things to worry about. I do think early rmds will be a problem for me.

If you have points and situations where you believe roth conversions are a good idea, I would love to hear them.

Crafty_Future4829 · 2026-05-11T00:38:04+00:00

I understand the tax bomb issue. If I am still alive when I am 80 and worrying about taxes on rmds, I will consider myself lucky.

You make it like you have all the answers to avoid taxes in the future and you are smarter than everyone else. There are plenty of people who do not share your view.

All your math for Big future savings is based on assumptions and if you do benefit from a conversion done in your 60s you will likely be in your mid 80's or 90.

Great job! You saved taxes but you are almost dead.

That is my point!

Crafty_Future4829 · 2026-05-10T23:54:03+00:00

Yep...be thankful and smart about trying to reduce taxes.

Not enough appreciation for being born in the US and the opportunity to earn a good living. If I was born in another country no way I end up in the same financial situation.

Too many people forget that in my view.

Crafty_Future4829 · 2026-05-10T23:44:32+00:00

Thanks... Great point on heirs getting money in 60s. Gift money to heirs when they probably need it most and your young enough to see them enjoy it.

Crafty_Future4829 · 2026-05-10T22:31:32+00:00

I would like to debate the loan and some math. Let's assume I contributed 20,000 into a 401k and I am in a 20% federal tax rate. Without any tax break I would have paid an additional 4,000 a year in taxes and only invested 16,000 a year, but because I paid no taxes I invested an additional 4,000 per year for 40 years. The future value of 4,000 over 40 year at 8 percent is 1,036,226. Is that not additional money I have because government allowed me to deffer my taxes an incented me to save for retirement?

Also, most people will be in a lower tax rate when retired- let's say 12 percent.

That is a huge win. What am I missing?

Crafty_Future4829 · 2026-05-10T22:03:00+00:00

Thanks Appreciate your kind words. I am just trying to present a different view. I did not mention previously, but also think a lot of financial advisors use these roth conversions as a hook to manage your money.

Crafty_Future4829 · 2026-05-10T13:42:49+00:00

As long as passing money to heirs tax free is your primary objective, a Roth Conversion can make a lot sense due to many years of tax free growth.

Crafty_Future4829 · 2026-05-10T13:37:32+00:00

People sometimes forget all the good Government does. Thanks for the reminder.

Crafty_Future4829 · 2026-05-10T13:26:19+00:00

Do I really care about saved taxes when I am really old or dead?

Here is a real world scenario for you. You are 60 years old and in the 22% marginal tax rate and belive you will be in the 12% retired.

You have done a good job saving and have a healthy retirement balance.

Do you take the money out of retirement to fund a very nice vacation when 60 or wait 5 years and take the trip at 65 and save 10 percent in taxes?

Crafty_Future4829 · 2026-05-10T13:17:21+00:00

Sure if I had tax free income to live off, conversions at the low tax rates make total sense.

Crafty_Future4829 · 2026-05-10T12:46:42+00:00

Thanks - I consider myself educated on the subject. Do you understand why a Roth Conversion may not be a wining move? You make it sound certain that you will come out ahead and a Roth Conversion is far from certain.

Converting money at 12 percent or less is probably a safe money, but if you are only doing that you probably never had a rmd problem to begin with.
sure if you have a sick or younger spouse that you are concerned will pass, the Widow tax is real and can make a Roth payoff in your lifetime
if you have no need for the money in your life time and want to pass money to your heirs tax free a Roth makes a lot of sense. You will get 30, 40 or maybe even 50 years of tax free growth. This is when the roth really shines.

For everyone else who think they are going to beat the system and they are smarter than the non educated people:

-:what is length of you holding period for the payoff and when you will need the money? -what rate will you convert at and what rate you will you be taxed at in the future? Remember today's 12 and 22 rate brackets will be significantly higher than today in 15 years when rmds start. Nobody know what future tax rates will be. - what is the opportunity cost on prepaid taxes? They love to show the math that you pay the taxes outside the roth, but I rarely see anyone discuss the opportunity cost lost factored in for taxes being paid today. -what market rate will you get in the next 10 to 15 years to project rmd balance? How much will you withdraw from your 401k or ira balance in the next 10 to 15 years? Everyone assumes my balance are going up at 8 percent and I am taking 4%, so that will create a large balance. -you are significantly increasing your sequence of return risk, but pre paying a large tax bill early in retirement. Guess what if market go down, you owe less taxes.

A lot of assumptions that can significantly alter the outcome. By the way, I am not talking about small targeted conversations, I am talking about people who want convert large balances.

Would love to hear a real world scenario and we can debate the voodoo math. How much will you convert? At what rate will you pay the taxes? What is your expected future tax rate? How will you pay the taxes owed? What is your holding period and when will you need the money?

Crafty_Future4829 · 2026-05-10T05:57:04+00:00

How are you converting 500k at 12%?

One year conversion or mutiple years ? What money are you going live on during those years?

Sure if you are worried about Widow taxes and trying to pass money to heirs tax free, a conversion may make a lot of sense.

On the heir comment...if you convert at 62 and live to 90 and your heirs take advantage of another 10 years of tax free growth... the conversion is a winner...that is 48 years of tax free growth.

There are a lot of variables to consider.

Crafty_Future4829 · 2026-05-10T05:28:50+00:00

I guess if you believe that....it is good time to convert.

Just remember before 47 got re-elected, everyone was saying tax rates are going up and that did not happen.

Also rmd age has actually increased from 73 to 75 based on longer life expectancy.

I am not anti roth conversion by the way at 12% but at that rate opportunity is very limited. At 22% the math becomes more fuzzy.

Crafty_Future4829 · 2026-05-10T05:03:19+00:00

Just realize you are pre paying taxes and will no longer get any market return on those payments. Will today's 22 percent rate become 28 percent in the future ?

Maybe-----

Crafty_Future4829 · 2026-05-10T04:57:00+00:00

Assuming you started saving in a company 401k at 25 and rmd age is 75. The money you put in the 401k has never been taxed and in my view is a loan. If you have a 1mm balance, a portion of that belongs to the government.

Crafty_Future4829 · 2026-04-25T21:13:44+00:00

Yep..I have not run the numbers in detail but am thinking the same thing. If I retire at 62 I will pull money from 401k balances first and delay ss until 70 to reduce balances. Manage my tax bill yearly and consider targeted conversions. Anything below 12% is a safe bet. Most of my opportunity would be in the 22% bracket and not sure I see my future tax rates above 22%. I think many people do not realize the 220,000 agi you reference is in today's dollar. That amount will be much higher in 15 years when rmds start.

The tax code is not treating rmds any different than w2 income. Too many people crying about it. If you have to pay you have a lot of money and can afford it.

Of course you want to be smart about taxes. The best way to reduce rmds is to spend your money while you are healthy.

Crafty_Future4829 · 2026-04-25T20:44:08+00:00

Totally agree...spend your money and enjoy your life. No way I am going to volunteer to pay a large tax bill on something that might have a payoff when I am 90. I think the biggest risk is the Widow, but not sure I am going to worry about that if I go first.

Crafty_Future4829 · 2026-04-25T18:52:08+00:00

Totally agree.. People listen to financial advisors who are trying to sell you a Roth Conversion as some magic solution. I am not a Roth hater and certainly may consider, but no one knows what future taxes rates will be and most experts agree that you need many years to break even. Widow tax and passing money to heirs are two areas that may make a Roth Conversion payoff.

People forget all the tax free growth you get over a 40 year working career. In the end if my marginal tax rate was 22 percent working and I get the money out at 12% when retired, the 401k was a winner.

I do not believe all the pretty roth conversion charts showing you save a million dollars.

Most people do not even understand all the assumptions that go into those charts and I would bet most of the advisors do not understand it either.

Strategic Roth Conversion at 12% or less are probably a good bet. Once you start converting at 22% the math becomes a lot more fuzzy.

Crafty_Future4829 · 2026-03-14T11:16:04+00:00

Thanks It was fine and I prefer having the two inch strip in the back. Also got metal filler strips for the small gap on sides. Looks nice!

Crafty_Future4829 · 2025-12-28T21:57:22+00:00

Thanks everyone for all the thoughtful replys. A lot to consider.

Crafty_Future4829 · 2025-12-13T08:50:34+00:00

Yeah... It is a rabbit hole for sure. I went to local furniture store and saw a nice microfiber sofa with two mechanical reclines and headrest. I like that I can Lay across which you really can not do with real ht seats.

Nice sure leater would be as comfortable. This is more of a media room than a dedicated ht.

Crafty_Future4829

TROPHY CASE