Ed Slott

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doobman
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Ed Slott

Post by doobman »

I recently saw a PBS show featuring Ed Slott....Retirement Rescue. He claims the biggest concerns with retirement are taxes and risk. He claims you can minimize these by

1. converting all IRA's/401K's to Roth IRA's.

2. buying permanent life insurance as an investment.

Any thoughts

Thank you
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ol_pops
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Re: Ed Slott

Post by ol_pops »

I like Edd Slott. A bit of a salesman but what he says is correct IF you can afford to do it.
As I understand it, the life insurance is to pay the taxes due at death.
It will be interesting to see if the estate tax reverts to $1M at the end of this year.
xerty24
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Re: Ed Slott

Post by xerty24 »

not so sure about the insurance angle, but he's a real expert when it comes to IRAs.
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Penguin
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Re: Ed Slott

Post by Penguin »

doobman wrote:
1. converting all IRA's/401K's to Roth IRA's.
Estate tax rates are very high. If you anticipate having to pay estate taxes you may want to convert to a Roth IRA before you die. Your estate would then be smaller because your Roth IRA would be smaller than your traditional IRA.
Jon
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sometimesinvestor
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Re: Ed Slott

Post by sometimesinvestor »

I would keep my conversions each year low enough to stay at the 25% bracket or below. Basically a traditional ira is a hedge aginst the lowering of income tax rates combined with the introduction of a VAT tax. As others have noted the possibility of paying estate tax is relevant to this decision.,
Muchtolearn
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Re: Ed Slott

Post by Muchtolearn »

Penguin wrote:
doobman wrote:
1. converting all IRA's/401K's to Roth IRA's.
Estate tax rates are very high. If you anticipate having to pay estate taxes you may want to convert to a Roth IRA before you die. Your estate would then be smaller because your Roth IRA would be smaller than your traditional IRA.
Alternatively, since it appears that ROTH funds are the most valuable one can have, one can convert a traditional IRA to a ROTH and keep it at the same value as long as you pay the taxes with other funds.
staythecourse
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Re: Ed Slott

Post by staythecourse »

Someone please correct me, but I was under the impression there is NO estate tax advantage to a Roth vs. traditional IRA. Either one is including in one's property at time of death and are susceptible to estate and GST taxes. No??

I love Roth's if one is not likely to spend all their money in their lifetime and want to give to heirs. The adv. are: 1. No RMD (basically government forcing you to take money and getting taxed even if you don't need to use it) and 2. No income tax even for heirs on inheritance.

Good luck.
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xerty24
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Re: Ed Slott

Post by xerty24 »

staythecourse wrote:Someone please correct me, but I was under the impression there is NO estate tax advantage to a Roth vs. traditional IRA. Either one is including in one's property at time of death and are susceptible to estate and GST taxes. No??
It's complicated. The IRD deduction for paying estate taxes on the larger nominal (pretax) value of a traditional IRA may not be valuable (or fully valuable) to the heirs. Different tax rates between the owner and the heirs make for many possibilities. I haven't researched everything for this situation but from what I know, if there were no tax rate differentials involved converting to Roth while alive would probably be as good or better than other options.
No excuses, no regrets.
sscritic
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Re: Ed Slott

Post by sscritic »

staythecourse wrote:Someone please correct me, but I was under the impression there is NO estate tax advantage to a Roth vs. traditional IRA. Either one is including in one's property at time of death and are susceptible to estate and GST taxes. No??
Yes, yes, yes, and no.

If the estate tax exclusion amount is $5 million, would you rather have $8 million in a traditional IRA ($3 million subject to estate tax) or $6 million in a Roth ($1 million subject to estate tax)? The estate tax on the Roth after conversion will be much less than the estate tax on the pre-converted traditional IRA. This ignores the income tax of $2 million paid on the conversion, but you asked about estate tax, not income tax.
staythecourse
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Re: Ed Slott

Post by staythecourse »

xerty24 wrote:
staythecourse wrote:Someone please correct me, but I was under the impression there is NO estate tax advantage to a Roth vs. traditional IRA. Either one is including in one's property at time of death and are susceptible to estate and GST taxes. No??
It's complicated. The IRD deduction for paying estate taxes on the larger nominal (pretax) value of a traditional IRA may not be valuable (or fully valuable) to the heirs. Different tax rates between the owner and the heirs make for many possibilities. I haven't researched everything for this situation but from what I know, if there were no tax rate differentials involved converting to Roth while alive would probably be as good or better than other options.
Thanks for the response. My question was if a person has 1mill in a Roth and another has a 1mill in a traditional at the time of death my belief was either would count as 1 million dollars in one's estate subject to both estate and GST taxes. Is that correct or no?
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
JDCPAEsq
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Re: Ed Slott

Post by JDCPAEsq »

staythecourse wrote:My question was if a person has 1mill in a Roth and another has a 1mill in a traditional at the time of death my belief was either would count as 1 million dollars in one's estate subject to both estate and GST taxes. Is that correct or no?
Correct
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Alan S.
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Re: Ed Slott

Post by Alan S. »

For short and medium length periods between your conversion and death, the estate tax will be smaller because your net estate will be smaller as a result of paying the conversion taxes.

However, if you convert while younger and live a long life, the estate tax savings from the above will erode because you will end up accumulating more by not having to pay those income taxes that you would have paid after taking TIRA RMDs.

Often, planners suggest late life conversions when the net estate will have an estate tax liability to reduce the net estate while making the inherited Roth IRAs more valuable to beneficiaries. If death follows within a short time frame the estate tax liability will be smaller.

Planning will be more difficult if Congress continues to tweak the estate tax credits every couple years rather than re visiting once a generation. The nation's deteriorating credit rating also functions to make long term planning difficult and estate plans may need to be redone frequently.
dhodson
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Re: Ed Slott

Post by dhodson »

the permanent insurance is still part of the estate unless purchased via an irrevocable trust.

cash pays for estate taxes. insurance is only a good way to do it if you need the insurance. If not, it will typically produce an inferior return. The future for dividends on whole life will likely continue to drop. There just arent any magical investments for insurance companies only.
dickenjb
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Re: Ed Slott

Post by dickenjb »

staythecourse wrote:Thanks for the response. My question was if a person has 1mill in a Roth and another has a 1mill in a traditional at the time of death my belief was either would count as 1 million dollars in one's estate subject to both estate and GST taxes. Is that correct or no?
Correct but off topic. The topic being discussed is whether converting a TIRA to a Roth helps avoid estate tax. It can.
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Lieutenant.Columbo
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Post by Lieutenant.Columbo »

bumping this Topic because I'd like to hear Alan S.'s late-2016 take on the subject of his mid-2012 reply below
Alan S. wrote:For short and medium length periods between your conversion and death, the estate tax will be smaller because your net estate will be smaller as a result of paying the conversion taxes.

However, if you convert while younger and live a long life, the estate tax savings from the above will erode because you will end up accumulating more by not having to pay those income taxes that you would have paid after taking TIRA RMDs.

Often, planners suggest late life conversions when the net estate will have an estate tax liability to reduce the net estate while making the inherited Roth IRAs more valuable to beneficiaries. If death follows within a short time frame the estate tax liability will be smaller.

Planning will be more difficult if Congress continues to tweak the estate tax credits every couple years rather than re visiting once a generation. The nation's deteriorating credit rating also functions to make long term planning difficult and estate plans may need to be redone frequently.
Alan S,
Would you please give us a 4-years-later version of your thoughts above (and, if you will, explain how your input on timing (and on amounts?) of Roth Conversions applies to someone in their mid-forties still accumulating and in the 29% effective Federal tax bracket [no state income tax], and planning to retire at mid fifties) in light of any Relevant tax law changes occurred (and foreseeable?) since 2012?
Thank you Very much!
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nisiprius
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Re: Ed Slott

Post by nisiprius »

doobman wrote:I recently saw a PBS show featuring Ed Slott....Retirement Rescue. He claims the biggest concerns with retirement are taxes and risk. He claims you can minimize these by

1. converting all IRA's/401K's to Roth IRA's.

2. buying permanent life insurance as an investment.

Any thoughts

Thank you
1) In my opinion's PBS's self-help programs can be very sleazy. Be careful.

2) My estate will not be large enough for estate tax to be a concern.

3) "Buying permanent life insurance as an investment"--whoa, big red flag. Never say never, but that's a weird thing to be suggesting, and is typically advocated only by people who make money in some way by selling life insurance. Who is Ed Slott and what does he do when he is not on PBS? OK, I was too cynical, his website says "We do not sell or endorse any financial products." Still, a red flag.
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BigJohn
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Re: Ed Slott

Post by BigJohn »

nisiprius wrote:"Buying permanent life insurance as an investment"--whoa, big red flag
In general I agree but I read Ed's books a few years back and don't think he recommends this as an investment. His most important objective is protecting the stretch option for the tIRA which your heirs inherit. If when the estate is settled your heirs owe money (taxes, attorney fees, end-of-life medical bills, etc) and don't have cash outside the tIRA to use to pay them, then they will have to make a tIRA withdrawal bigger than required. This increases their taxable income, which further increases their tax due which requires additional tIRA withdrawals. Although less onerous,he also wants to avoid your heirs tapping into their inherited Roth's at greater than RMD amounts as that would forego long term tax free growth.

So what I took away from my reading was to be sure that you leave your heirs enough money outside the IRAs so they can stretch them to the max extent possible. It may not apply to all and permanent life insurance is one way that is suggested but not the only way. Based on this, I don't think he made an investment recommendation. I see it as a potential piece of a long term tax minimization strategy that needs to be evaluated vs the alternatives.
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tooluser
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Re: Ed Slott

Post by tooluser »

Heh. :!: Somebody bumped a thread from 4 years ago.

I happened to catch him at lunchtime today. He advocated protecting against the "five biggest retirement risks". One risk solution was recommending umbrella liability insurance to protect one's nest egg. All of the recommendations seemed appropriate to me (the other four were obvious to any Boglehead), and none involved life insurance, at least while I was watching. But there are more than five things to consider.

I guess things change over time, and so do the recommendations. Advice that doesn't stand the test of time...

With me, it all gets filtered in with the other information/noise. I hope my advice weighting factors are correct, and that they are appropriately updated with experience.
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david99
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Re: Ed Slott

Post by david99 »

nisiprius wrote:
doobman wrote:I recently saw a PBS show featuring Ed Slott....Retirement Rescue. He claims the biggest concerns with retirement are taxes and risk. He claims you can minimize these by

1. converting all IRA's/401K's to Roth IRA's.

2. buying permanent life insurance as an investment.

Any thoughts

Thank you
1) In my opinion's PBS's self-help programs can be very sleazy. Be careful.

2) My estate will not be large enough for estate tax to be a concern.

3) "Buying permanent life insurance as an investment"--whoa, big red flag. Never say never, but that's a weird thing to be suggesting, and is typically advocated only by people who make money in some way by selling life insurance. Who is Ed Slott and what does he do when he is not on PBS? OK, I was too cynical, his website says "We do not sell or endorse any financial products." Still, a red flag.


I agree that PBS's self help programs can be sleazy. Most of the time someone is selling something and they are using PBS as a platform.
bsteiner
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Re: Ed Slott

Post by bsteiner »

I've been on some continuing education panels with Ed, and I'm one of the writers and technical advisors for his newsletter, so I'll try to answer this.

Many people don't understand the benefits of the Roth conversion. Ed has done a good job educating people as to the Roth conversion.

The market for his seminars is mainly stockbrokers and insurance agents, which may explain his view on life insurance.
secretlysaving
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Re: Ed Slott

Post by secretlysaving »

dhodson wrote:the permanent insurance is still part of the estate unless purchased via an irrevocable trust.
Actually what Slott advocates is that the beneficiaries take out the life insurance policy on the older family member. Then the money is NOT part of the estate.
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