Your thoughts on the teachings of Ed Slott

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LMK5
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Your thoughts on the teachings of Ed Slott

Post by LMK5 » Thu Mar 21, 2019 8:31 am

I just read Ed Slott's book The Retirement Savings Time Bomb and How to Diffuse It. Pretty interesting stuff. Basically he is in favor of converting all pre-tax retirement funds to Roth. Also, he advises to leave your Roth to a child, but have a life insurance policy in place so that your spouse will get paid by the policy. The object is to have the Roth grow tax free for the longest possible time. He also has some strategies on general estate planning. He appears to really know his stuff inside and out.

What are your thoughts on his advice? Does anyone here have a life insurance policy in place that would pay off at a very old age (Ed didn't talk about how expensive that would be, or the type of policy that would be best)? Does anyone find fault in his advice or are you an adherent?
Last edited by LMK5 on Thu Mar 21, 2019 11:37 am, edited 1 time in total.

marcopolo
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Re: Your thoughts on the teachings of Ed Slott

Post by marcopolo » Thu Mar 21, 2019 8:46 am

LMK5 wrote:
Thu Mar 21, 2019 8:31 am
I just read Ed Slott's book The Retirement Savings Time Bomb and How to Diffuse It. Pretty interesting stuff. Basically he is in favor of converting all pre-tax retirement funds to Roth. Also, he advises to leave your Roth to a child, but have a life insurance policy in place so that your spouse will get paid by the policy. The object is to have the Roth grow tax free for the longest possible time. He also has some strategies on general estate planning. He appears to really know his stuff inside and out.

What are your thoughts on his advice? Does anyone here have a life insurance policy in place that would pay off at a very old age (Ed didn't talk about how expensive that would be, or the type of policy that would be best)? Does anyone find fault in his advice or are you an adherent?
He pounds the "Convert everything to Roth" message pretty hard. It is overly simplistic, and in most cases, results in paying more taxes than necessary. Which, seems to be counter to his objective.

You can read the numerous threads on the Roth conversions strategy. But, i think there is pretty solid consensus that it makes sense to leave some money in tax-deferred, at least so that RMDs can fill the 0% tax bracket. Otherwise, you are paying taxes, at your marginal rate, on converting money that you could have withdrawn tax-free later.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Storcher
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Re: Your thoughts on the teachings of Ed Slott

Post by Storcher » Thu Mar 21, 2019 9:00 am

I would be very interested in reading the replies to your question. Having watched Ed Slott on PBS, I wondered at what age, and what income/tax level does rolling over an regular IRA into a Roth cease to make sense? Being that I am 68, an advisor told me that it was too late in the game to do so. Then again,would moving from NY to Florida mitigate some of the disadvantages. I wish there was a calculator, as there are with dealing with various Social Security scenarios, to at least give a rough approximation of the possible outcomes for making that decision.

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Re: Your thoughts on the teachings of Ed Slott

Post by livesoft » Thu Mar 21, 2019 9:05 am

I read / skimmed one of his books. My impression from that was that his advice is for the very wealthy who have huge account values and who work until they die and leave huge estates to their heirs. I think he is based around/in NYC where many of his possible clients actually do have huge account values and huge taxes.

I don't fit his demographic, so his ideas don't apply to me. He is trying to solve a problem that many of us do not have.
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munemaker
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Re: Your thoughts on the teachings of Ed Slott

Post by munemaker » Thu Mar 21, 2019 9:40 am

Storcher wrote:
Thu Mar 21, 2019 9:00 am
I wish there was a calculator, as there are with dealing with various Social Security scenarios, to at least give a rough approximation of the possible outcomes for making that decision.
Have you checked out Retiree Portfolio Model (RPM), the free spreadsheet from Boglehead Bigfoot48?

https://www.bogleheads.org/wiki/Retiree_Portfolio_Model

I have spent quite a few hours with this tool, and it is very helpful in making Roth conversion decisions.

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HueyLD
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Re: Your thoughts on the teachings of Ed Slott

Post by HueyLD » Thu Mar 21, 2019 9:44 am

livesoft wrote:
Thu Mar 21, 2019 9:05 am
I read / skimmed one of his books. My impression from that was that his advice is for the very wealthy who have huge account values and who work until they die and leave huge estates to their heirs. I think he is based around/in NYC where many of his possible clients actually do have huge account values and huge taxes.

I don't fit his demographic, so his ideas don't apply to me. He is trying to solve a problem that many of us do not have.
+1!

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Re: Your thoughts on the teachings of Ed Slott

Post by bsteiner » Thu Mar 21, 2019 9:51 am

I know Ed very well. He and I have been on some continuing education panels together, and I've written for his newsletter.

He's not a lawyer, but since he focuses on one narrow area (IRAs), he's very knowledgeable. We have many similar views but some different views.

Obviously every IRA owner shouldn't convert his/her entire IRA to a Roth, and many if not most shouldn't do any conversions while they're working. But I've found that Roth conversions have been underused rather than overused. I think it's helpful for him to point out the benefits of the Roth conversion.

I haven't analyzed whether it would make sense to leave the IRA to or in trust for the children and other assets to the spouse, especially now that fewer estates will pay estate tax. Most clients leave their IRA to the spouse for the rollover.

While there's a substantial cost to buying life insurance, it does provide liquidity to pay the estate tax without having to tap the IRA, so as to preserve the stretch. I haven't analyzed that.

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Re: Your thoughts on the teachings of Ed Slott

Post by KlangFool » Thu Mar 21, 2019 9:53 am

HueyLD wrote:
Thu Mar 21, 2019 9:44 am
livesoft wrote:
Thu Mar 21, 2019 9:05 am
I read / skimmed one of his books. My impression from that was that his advice is for the very wealthy who have huge account values and who work until they die and leave huge estates to their heirs. I think he is based around/in NYC where many of his possible clients actually do have huge account values and huge taxes.

I don't fit his demographic, so his ideas don't apply to me. He is trying to solve a problem that many of us do not have.
+1!
+2.

KlangFool

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Re: Your thoughts on the teachings of Ed Slott

Post by KlangFool » Thu Mar 21, 2019 9:56 am

Folks,

Come on. This is personal finance. It is personal. Before anyone takes anyone's else advice, they need to understand the assumptions behind that advice.

A piece of advice for someone rich enough to worry about RMD is definitely not relevant for someone that needs social security to retire.

KlangFool

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LMK5
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Re: Your thoughts on the teachings of Ed Slott

Post by LMK5 » Thu Mar 21, 2019 11:35 am

Storcher wrote:
Thu Mar 21, 2019 9:00 am
I would be very interested in reading the replies to your question. Having watched Ed Slott on PBS, I wondered at what age, and what income/tax level does rolling over an regular IRA into a Roth cease to make sense? Being that I am 68, an advisor told me that it was too late in the game to do so. Then again,would moving from NY to Florida mitigate some of the disadvantages. I wish there was a calculator, as there are with dealing with various Social Security scenarios, to at least give a rough approximation of the possible outcomes for making that decision.
You can check out the Roth conversion calculator at https://www.schwab.com/public/schwab/in ... conversion

There are lots of others too.

123
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Re: Your thoughts on the teachings of Ed Slott

Post by 123 » Thu Mar 21, 2019 12:02 pm

There's another "financial" radio broadcaster that also seems to advocate converting most of a Traditional IRA to a Roth, Doug Andrew https://liveabundant.com His pitch is for some kind of laser fund option he sells which is a product for investors that can't tolerate any loss. Listening to some of these pitchmen is entertaining once in awhile. There do seem to be a lot of them out there. Most of their themes eventually seem to boil down to some kind or version of an annuity, where they make their money.

For me, the bogleheads method is a lot easier, more tax efficient, and lower risk.
The closest helping hand is at the end of your own arm.

drzzzzz
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Re: Your thoughts on the teachings of Ed Slott

Post by drzzzzz » Thu Mar 21, 2019 12:25 pm

I heard Ed speak and he is a huge proponent of Roth IRAs and practically at any age. It's the purchase of the insurance policy that makes less sense to me since it becomes so expensive as you age if term or else you are buying insurance to use as an investment if whole life. I did howver decide that it made sense for my parents to do some Roth conversions and then name their grandchildren as beneficiaries of the Roth rather than their children since my parents tax bracket is lower then their children's and likely lower than their grandchildren's in the future as well.

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LMK5
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Re: Your thoughts on the teachings of Ed Slott

Post by LMK5 » Thu Mar 21, 2019 12:41 pm

123 wrote:
Thu Mar 21, 2019 12:02 pm
There's another "financial" radio broadcaster that also seems to advocate converting most of a Traditional IRA to a Roth, Doug Andrew https://liveabundant.com His pitch is for some kind of laser fund option he sells which is a product for investors that can't tolerate any loss. Listening to some of these pitchmen is entertaining once in awhile. There do seem to be a lot of them out there. Most of their themes eventually seem to boil down to some kind or version of an annuity, where they make their money.

For me, the bogleheads method is a lot easier, more tax efficient, and lower risk.
Where can one find the Bogleheads method?

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Re: Your thoughts on the teachings of Ed Slott

Post by JBTX » Thu Mar 21, 2019 12:45 pm

marcopolo wrote:
Thu Mar 21, 2019 8:46 am
LMK5 wrote:
Thu Mar 21, 2019 8:31 am
I just read Ed Slott's book The Retirement Savings Time Bomb and How to Diffuse It. Pretty interesting stuff. Basically he is in favor of converting all pre-tax retirement funds to Roth. Also, he advises to leave your Roth to a child, but have a life insurance policy in place so that your spouse will get paid by the policy. The object is to have the Roth grow tax free for the longest possible time. He also has some strategies on general estate planning. He appears to really know his stuff inside and out.

What are your thoughts on his advice? Does anyone here have a life insurance policy in place that would pay off at a very old age (Ed didn't talk about how expensive that would be, or the type of policy that would be best)? Does anyone find fault in his advice or are you an adherent?
He pounds the "Convert everything to Roth" message pretty hard. It is overly simplistic, and in most cases, results in paying more taxes than necessary. Which, seems to be counter to his objective.

You can read the numerous threads on the Roth conversions strategy. But, i think there is pretty solid consensus that it makes sense to leave some money in tax-deferred, at least so that RMDs can fill the 0% tax bracket. Otherwise, you are paying taxes, at your marginal rate, on converting money that you could have withdrawn tax-free later.
I think there are two differences in the audience he is speaking to, and Bogleheads.

1. There is a significant contingent of Bogleheads who save a lot, spend modestly, plan to retire early, and will likely have the opportunity to do Roth conversions after retirement but prior to Social Security. However, I don't think that is the rule for most people outside this forum. Even higher income likely spend more, and plan to work longer. So they may not have a big window, or any at all, between retirement and drawing Social Security.

2. I think conventional wisdom outside Boglehead is tax rates are more likely to go up than down in the future. In this forum, such discussions are not allowed in any depth, and the result is assumptions are usually rates will stay the same.

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Re: Your thoughts on the teachings of Ed Slott

Post by JBTX » Thu Mar 21, 2019 12:47 pm

bsteiner wrote:
Thu Mar 21, 2019 9:51 am
I know Ed very well. He and I have been on some continuing education panels together, and I've written for his newsletter.

He's not a lawyer, but since he focuses on one narrow area (IRAs), he's very knowledgeable. We have many similar views but some different views.

Obviously every IRA owner shouldn't convert his/her entire IRA to a Roth, and many if not most shouldn't do any conversions while they're working. But I've found that Roth conversions have been underused rather than overused. I think it's helpful for him to point out the benefits of the Roth conversion.

I haven't analyzed whether it would make sense to leave the IRA to or in trust for the children and other assets to the spouse, especially now that fewer estates will pay estate tax. Most clients leave their IRA to the spouse for the rollover.

While there's a substantial cost to buying life insurance, it does provide liquidity to pay the estate tax without having to tap the IRA, so as to preserve the stretch. I haven't analyzed that.
I've found some of your strategies of using Roth's for adult children's IRA trusts very interesting - and potentially very applicable to our situation. By using Roth you can avoid high trust tax rates.

2015
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Re: Your thoughts on the teachings of Ed Slott

Post by 2015 » Thu Mar 21, 2019 12:54 pm

The click bait book title told me all I needed to know about my not wanting to monetize his writings. Endlessly jumping from strategy to strategy based on the latest dangling "shiny object", be it a latest "study", book, blog post, or "expert" pontification, does more harm than good.

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munemaker
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Re: Your thoughts on the teachings of Ed Slott

Post by munemaker » Thu Mar 21, 2019 1:31 pm

LMK5 wrote:
Thu Mar 21, 2019 11:35 am

You can check out the Roth conversion calculator at https://www.schwab.com/public/schwab/in ... conversion
I am suspicious of this calculator.

With RPM (where you can see all the details), the case for us doing full Roth conversions is very strong. Here, it is slightly negative. If you are in the typical case of married filing jointly, then part of the calculation depends on the age the first spouse passes which is not incorporated into this calculator. It seems over simplified for such a complex decision.

Another point...if you are in IRMAA penalty range, doing Roth conversions early on can save you significant IRMAA penalties in the long run...in my case, RPM worked it out at $50,000 over a 35 year lifetime of the last spouse.

Bobby206
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Re: Your thoughts on the teachings of Ed Slott

Post by Bobby206 » Thu Mar 21, 2019 2:18 pm

123 wrote:
Thu Mar 21, 2019 12:02 pm
There's another "financial" radio broadcaster that also seems to advocate converting most of a Traditional IRA to a Roth, Doug Andrew https://liveabundant.com His pitch is for some kind of laser fund option he sells which is a product for investors that can't tolerate any loss. Listening to some of these pitchmen is entertaining once in awhile. There do seem to be a lot of them out there. Most of their themes eventually seem to boil down to some kind or version of an annuity, where they make their money.

For me, the bogleheads method is a lot easier, more tax efficient, and lower risk.
Is "laser fund" another name for life insurance and/or annuity sales!? The website looks tooooooo slick.

letsgobobby
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Re: Your thoughts on the teachings of Ed Slott

Post by letsgobobby » Thu Mar 21, 2019 2:26 pm

Deleted
Last edited by letsgobobby on Thu Apr 18, 2019 12:51 am, edited 1 time in total.

bsteiner
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Re: Your thoughts on the teachings of Ed Slott

Post by bsteiner » Thu Mar 21, 2019 2:32 pm

Storcher wrote:
Thu Mar 21, 2019 9:00 am
I would be very interested in reading the replies to your question. Having watched Ed Slott on PBS, I wondered at what age, and what income/tax level does rolling over an regular IRA into a Roth cease to make sense? ...
It depends. It generally makes sense to convert to the extent you can at a tax rate less than, equal to, or a little higher (but not too much higher) than the tax rate that would otherwise apply to distributions.
Storcher wrote:
Thu Mar 21, 2019 9:00 am
... Being that I am 68, an advisor told me that it was too late in the game to do so. ...
What's an "advisor?"

You'll never be any younger than you are now.

What is the relevance of your age (other than if you're considering converting at a tax rate somewhat higher than the tax rate that would otherwise apply to the distributions)? Even at 68, there could be many decades between now and when your beneficiaries have to take their last required distributions.
Storcher wrote:
Thu Mar 21, 2019 9:00 am
... would moving from NY to Florida mitigate some of the disadvantages. ....
What disadvantages?

Obviously, everything else being equal, your tax rate will drop if you move from New York to Florida.
Storcher wrote:
Thu Mar 21, 2019 9:00 am
... I wish there was a calculator, as there are with dealing with various Social Security scenarios, to at least give a rough approximation of the possible outcomes for making that decision.
There's the Brentmark Retirement Plan Analyzer, https://www.brentmark.com/software/reti ... -analyzer/. We used it many years ago, though we mainly use Excel.
JBTX wrote:
Thu Mar 21, 2019 12:45 pm
... I think conventional wisdom outside Boglehead is tax rates are more likely to go up than down in the future. In this forum, such discussions are not allowed in any depth, and the result is assumptions are usually rates will stay the same.
We're allowed to point out that under the law as it now exists, tax rates are scheduled to revert to pre-2018 levels in 2026.

When I analyze this, I generally assume that future tax rates will be whatever they are scheduled to be based on the law in effect at the time.

jdb
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Re: Your thoughts on the teachings of Ed Slott

Post by jdb » Thu Mar 21, 2019 5:07 pm

Garbage in garbage out. For those of us who were in maximum tax brackets during all pre retirement years the advice was garbage. Why would we pay more tax to convert? The traditional IRA fits our purposes nicely. Can skip the book. Thanks.

Dandy
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Re: Your thoughts on the teachings of Ed Slott

Post by Dandy » Fri Mar 22, 2019 7:48 am

I can't speak from his advice -- much of it might make sense. But, in his PBS stints he comes across as a carnival barker e.g. having the audience repeat back his mantra about "never taxed". As pointed out he positions it as a universally best option in all cases to convert all your TIRA to a Roth. Also, I don't find any other investment guru's suggesting that everyone convert all their TIRA to a Roth. Why is that??

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Re: Your thoughts on the teachings of Ed Slott

Post by cherijoh » Fri Mar 22, 2019 8:09 am

bsteiner wrote:
Thu Mar 21, 2019 9:51 am
Obviously every IRA owner shouldn't convert his/her entire IRA to a Roth, and many if not most shouldn't do any conversions while they're working. But I've found that Roth conversions have been underused rather than overused. I think it's helpful for him to point out the benefits of the Roth conversion.

I haven't analyzed whether it would make sense to leave the IRA to or in trust for the children and other assets to the spouse, especially now that fewer estates will pay estate tax. Most clients leave their IRA to the spouse for the rollover.
The original edition of The Retirement Savings Time Bomb and How to Diffuse It was published in 2007. It looks like it was updated in 2012, but I'm never sure how thoroughly authors update books - just correcting a few out-of-date numbers or rewriting entire chapters? As Bsteiner points out in his above post, a lot has changed in estate tax law since 2007.

OP- If you are interested in the topic of whether or not to convert to Roth, I would recommend checking out another author, James Lange. You can even get a free pdf of his book The Roth Revolution.

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Re: Your thoughts on the teachings of Ed Slott

Post by letsgobobby » Fri Mar 22, 2019 8:38 am

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bsteiner
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Re: Your thoughts on the teachings of Ed Slott

Post by bsteiner » Fri Mar 22, 2019 11:41 am

cherijoh wrote:
Fri Mar 22, 2019 8:09 am
...
If you are interested in the topic of whether or not to convert to Roth, I would recommend checking out another author, James Lange. You can even get a free pdf of his book The Roth Revolution.
I know Jim Lange and was a guest on his radio show a couple of times. His books are worth reading.

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LMK5
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Re: Your thoughts on the teachings of Ed Slott

Post by LMK5 » Fri Mar 22, 2019 12:13 pm

Dandy wrote:
Fri Mar 22, 2019 7:48 am
I can't speak from his advice -- much of it might make sense. But, in his PBS stints he comes across as a carnival barker e.g. having the audience repeat back his mantra about "never taxed". As pointed out he positions it as a universally best option in all cases to convert all your TIRA to a Roth. Also, I don't find any other investment guru's suggesting that everyone convert all their TIRA to a Roth. Why is that??
I somewhat agree with the "Carnival Barker" observation. It's tough to make this stuff entertaining but he's got to try. The one part of the PBS broadcasts that I thought left a hole was when he talked about incorporating life insurance. He never explained that. That's one of the main reasons why I got the book, hoping to get the details. But in the book, when he explains how to use life insurance to compensate the spouse when one leaves the IRA to the children who have more years to stretch out the withdrawals, he says to see an insurance person about what type of insurance to get. I was surprised by this, but I think it's because in order to make that work you'd have to make sure you're insured to a very advanced age. That would be horrendously expensive and maybe that would put a kink in his advice, so possibly that's why he doesn't delve into the insurance details because it may sound very impractical for most people.

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Re: Your thoughts on the teachings of Ed Slott

Post by socaldude » Fri Mar 22, 2019 12:41 pm

I agree with the "carnival barker" title, I think he really scares old folks with his antics and advice to buy life insurance. "It's all about the taxes !!" Uhhh, no it's not Ed. PBS could do a much better job of toning down the sales pitch of many of these corny shows. The wild and stiff arm/body movements, so lame. And I feel his 12 (?) dvd set ( act now!!) could be condensed on to 1 disc with room to spare. The multiple dvd sets are designed to make you feel your are getting more for your money. I respect Suze O. but same type of schtick and pkge. The Brain guy and his wife... just shoot me. I feel that PBS loses viewers when they broadcast this crapola.

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Re: Your thoughts on the teachings of Ed Slott

Post by Miriam2 » Fri Mar 22, 2019 4:42 pm

LMK5 wrote: I just read Ed Slott's book The Retirement Savings Time Bomb and How to Diffuse It. Pretty interesting stuff. . . . Does anyone find fault in his advice or are you an adherent?
I have never read Ed Slott's book nor listened to him on programs, but I do frequent his website regularly, www.irahelp.com and receive email updates regularly from his site. He has several tax attorneys and CPA's writing for him and I find their articles very helpful - not too complicated yet explain the topic very well. I have a better feeling of "trust" in the information knowing that it comes from his site, as opposed to some article here or there. He also has a Discussion Forum for IRA's, in case you haven't read enough already :wink:

For me, the best Roth conversion book I read is "Go Roth" by Kaye Thomas. Very well laid out and not overly complicated, yet covers everything. I am sorry that his tax information website www.Fairmark.com is going though tough times and its tax information forum is no longer useful :(

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Re: Your thoughts on the teachings of Ed Slott

Post by Pigeye Brewster » Fri Mar 22, 2019 9:17 pm

Miriam2 wrote:
Fri Mar 22, 2019 4:42 pm
I have never read Ed Slott's book nor listened to him on programs, but I do frequent his website regularly, www.irahelp.com and receive email updates regularly from his site. He has several tax attorneys and CPA's writing for him and I find their articles very helpful - not too complicated yet explain the topic very well. I have a better feeling of "trust" in the information knowing that it comes from his site, as opposed to some article here or there. He also has a Discussion Forum for IRA's, in case you haven't read enough already :wink:
I've seen the PBS programs and the "carnival barker" description is a good one.

And I've also visited his website on several occasions. I agree with you that it is a helpful resource.

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Re: Your thoughts on the teachings of Ed Slott

Post by 4nwestsaylng » Fri Mar 22, 2019 9:45 pm

marcopolo wrote:
Thu Mar 21, 2019 8:46 am
LMK5 wrote:
Thu Mar 21, 2019 8:31 am
I just read Ed Slott's book The Retirement Savings Time Bomb and How to Diffuse It. Pretty interesting stuff. Basically he is in favor of converting all pre-tax retirement funds to Roth. Also, he advises to leave your Roth to a child, but have a life insurance policy in place so that your spouse will get paid by the policy. The object is to have the Roth grow tax free for the longest possible time. He also has some strategies on general estate planning. He appears to really know his stuff inside and out.

What are your thoughts on his advice? Does anyone here have a life insurance policy in place that would pay off at a very old age (Ed didn't talk about how expensive that would be, or the type of policy that would be best)? Does anyone find fault in his advice or are you an adherent?
He pounds the "Convert everything to Roth" message pretty hard. It is overly simplistic, and in most cases, results in paying more taxes than necessary. Which, seems to be counter to his objective.

You can read the numerous threads on the Roth conversions strategy. But, i think there is pretty solid consensus that it makes sense to leave some money in tax-deferred, at least so that RMDs can fill the 0% tax bracket. Otherwise, you are paying taxes, at your marginal rate, on converting money that you could have withdrawn tax-free later.
For RMD's to fill the 0% tax bracket, they would have to be at or under the standard deduction of $12000 (unless you have more to itemize), and after the standard deduction the first dollar is taxed at 10%, so you would have to have made no interest/cap gains in your taxable account, and all your other funds would be in a Roth. I guess if you did Roths from the start. Otherwise an IRA that funds an RMDof $12000 or less, to qualify for "zero tax", would be pretty small. You can get there with Roth conversions,but if still working at a good salary, you lose tax deferral and instead pay even more tax for these conversions.

Ed Slott is a well respected advisor, but it is not that easy to be "zero tax". It sells a lot of books.

Alan S.
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Re: Your thoughts on the teachings of Ed Slott

Post by Alan S. » Fri Mar 22, 2019 10:21 pm

4nwestsaylng wrote:
Fri Mar 22, 2019 9:45 pm
marcopolo wrote:
Thu Mar 21, 2019 8:46 am
LMK5 wrote:
Thu Mar 21, 2019 8:31 am
I just read Ed Slott's book The Retirement Savings Time Bomb and How to Diffuse It. Pretty interesting stuff. Basically he is in favor of converting all pre-tax retirement funds to Roth. Also, he advises to leave your Roth to a child, but have a life insurance policy in place so that your spouse will get paid by the policy. The object is to have the Roth grow tax free for the longest possible time. He also has some strategies on general estate planning. He appears to really know his stuff inside and out.

What are your thoughts on his advice? Does anyone here have a life insurance policy in place that would pay off at a very old age (Ed didn't talk about how expensive that would be, or the type of policy that would be best)? Does anyone find fault in his advice or are you an adherent?
He pounds the "Convert everything to Roth" message pretty hard. It is overly simplistic, and in most cases, results in paying more taxes than necessary. Which, seems to be counter to his objective.

You can read the numerous threads on the Roth conversions strategy. But, i think there is pretty solid consensus that it makes sense to leave some money in tax-deferred, at least so that RMDs can fill the 0% tax bracket. Otherwise, you are paying taxes, at your marginal rate, on converting money that you could have withdrawn tax-free later.
For RMD's to fill the 0% tax bracket, they would have to be at or under the standard deduction of $12000 (unless you have more to itemize), and after the standard deduction the first dollar is taxed at 10%, so you would have to have made no interest/cap gains in your taxable account, and all your other funds would be in a Roth. I guess if you did Roths from the start. Otherwise an IRA that funds an RMDof $12000 or less, to qualify for "zero tax", would be pretty small. You can get there with Roth conversions,but if still working at a good salary, you lose tax deferral and instead pay even more tax for these conversions.

Ed Slott is a well respected advisor, but it is not that easy to be "zero tax". It sells a lot of books.
An inherited Roth IRA would be immediately qualified in most cases with all distributions tax free. Even when not qualified for 5 more years in the worst case scenario distributions several times the child's RMD would also be tax free under the ordering rules.

So taxes are not the issue. However, there are two issues of concern:
1) Since the Clark v. Rameker SCOTUS case, inherited IRAs are NOT treated as retirement funds and have no creditor protection under Fed law. A few states do protect them from creditors under State statutes, but it's important to live in one of those states, or perhaps leave the Roth in trust.
2) Not being treated as retirement funds has left the door wide open to a mandatory stretch destroying 5 year rule for larger inherited accounts which we cannot discuss further due to pending legislation to do exactly that.

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Re: Your thoughts on the teachings of Ed Slott

Post by marcopolo » Fri Mar 22, 2019 11:40 pm

4nwestsaylng wrote:
Fri Mar 22, 2019 9:45 pm
marcopolo wrote:
Thu Mar 21, 2019 8:46 am
LMK5 wrote:
Thu Mar 21, 2019 8:31 am
I just read Ed Slott's book The Retirement Savings Time Bomb and How to Diffuse It. Pretty interesting stuff. Basically he is in favor of converting all pre-tax retirement funds to Roth. Also, he advises to leave your Roth to a child, but have a life insurance policy in place so that your spouse will get paid by the policy. The object is to have the Roth grow tax free for the longest possible time. He also has some strategies on general estate planning. He appears to really know his stuff inside and out.

What are your thoughts on his advice? Does anyone here have a life insurance policy in place that would pay off at a very old age (Ed didn't talk about how expensive that would be, or the type of policy that would be best)? Does anyone find fault in his advice or are you an adherent?
He pounds the "Convert everything to Roth" message pretty hard. It is overly simplistic, and in most cases, results in paying more taxes than necessary. Which, seems to be counter to his objective.

You can read the numerous threads on the Roth conversions strategy. But, i think there is pretty solid consensus that it makes sense to leave some money in tax-deferred, at least so that RMDs can fill the 0% tax bracket. Otherwise, you are paying taxes, at your marginal rate, on converting money that you could have withdrawn tax-free later.
For RMD's to fill the 0% tax bracket, they would have to be at or under the standard deduction of $12000 (unless you have more to itemize), and after the standard deduction the first dollar is taxed at 10%, so you would have to have made no interest/cap gains in your taxable account, and all your other funds would be in a Roth. I guess if you did Roths from the start. Otherwise an IRA that funds an RMDof $12000 or less, to qualify for "zero tax", would be pretty small. You can get there with Roth conversions,but if still working at a good salary, you lose tax deferral and instead pay even more tax for these conversions.

Ed Slott is a well respected advisor, but it is not that easy to be "zero tax". It sells a lot of books.
A married couple at RMD age would have a standard deduction $27k, allowing combined IRAs of around $700k. Not exactly peanuts.
Then there is the 10% bracket allowing close to another $500k at a rate likely to be much lower than the one at which one would be doing the conversions.

I love Roth Conversions, but unless it is intended for estate planning purposes, i don't see how it makes sense to convert ALL Trad IRAs to Roths.
I would be interested to hear arguments to the contrary, as I am always looking for ways to improve my plan.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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LMK5
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Re: Your thoughts on the teachings of Ed Slott

Post by LMK5 » Sat Mar 23, 2019 7:34 am

A married couple at RMD age would have a standard deduction $27k, allowing combined IRAs of around $700k. Not exactly peanuts.
Then there is the 10% bracket allowing close to another $500k at a rate likely to be much lower than the one at which one would be doing the conversions.
marcopolo, can you clarify what you mean by the above?

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Re: Your thoughts on the teachings of Ed Slott

Post by Longdog » Sat Mar 23, 2019 7:57 am

LMK5 wrote:
Fri Mar 22, 2019 12:13 pm
Dandy wrote:
Fri Mar 22, 2019 7:48 am
I can't speak from his advice -- much of it might make sense. But, in his PBS stints he comes across as a carnival barker e.g. having the audience repeat back his mantra about "never taxed". As pointed out he positions it as a universally best option in all cases to convert all your TIRA to a Roth. Also, I don't find any other investment guru's suggesting that everyone convert all their TIRA to a Roth. Why is that??
I somewhat agree with the "Carnival Barker" observation. It's tough to make this stuff entertaining but he's got to try. The one part of the PBS broadcasts that I thought left a hole was when he talked about incorporating life insurance. He never explained that. That's one of the main reasons why I got the book, hoping to get the details. But in the book, when he explains how to use life insurance to compensate the spouse when one leaves the IRA to the children who have more years to stretch out the withdrawals, he says to see an insurance person about what type of insurance to get. I was surprised by this, but I think it's because in order to make that work you'd have to make sure you're insured to a very advanced age. That would be horrendously expensive and maybe that would put a kink in his advice, so possibly that's why he doesn't delve into the insurance details because it may sound very impractical for most people.
Agree with the "carnival barker" comments. In his PBS special he specifically says "whole life insurance" not term life insurance. I haven't done the math, and I agree with a lot of what he says, but I agree that the life insurance claim seems a bit suspect, given their high administrative costs. He seems to be universally against paying any more taxes than necessary (which is fine), but is totally fine paying high fees to an insurance broker or salesman. Maybe the numbers work out to your favor; maybe not. But he doesn't even show talk about how to do the calculation or even mention that whole life insurance includes a lot of fees that are simply overhead without benefit - in other words, fees instead of taxes.
Steve

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Re: Your thoughts on the teachings of Ed Slott

Post by marcopolo » Sat Mar 23, 2019 8:40 am

LMK5 wrote:
Sat Mar 23, 2019 7:34 am
A married couple at RMD age would have a standard deduction $27k, allowing combined IRAs of around $700k. Not exactly peanuts.
Then there is the 10% bracket allowing close to another $500k at a rate likely to be much lower than the one at which one would be doing the conversions.
marcopolo, can you clarify what you mean by the above?
One of the main arguments for doing Roth conversions is to reduce the taxes that would be due when you have to start withdrawing from your Trad IRA at age 70.5+ (RMDs). But, a significant portion of those withdrawals can be done by paying either 0% tax, or a 10% tax. Which is usually much lower than would have been paid to do the conversion from Trad IRA to Roth IRA.

For example, due to the standard deduction ($24,400 for couple in 2019, plus $1300 per person over 65), the first $27k withdrawn from the Trad IRA would be applied against that deduction. At a roughly 4% RMD rate, that equates to a Trad IRA value $675k, from which RMDs could be taken without paying any taxes. The next $19k of income for a couple is taxed at 10%, so, at the same 4% RMD rate, that equates to an additional $475k in Trad IRA.

So, a married couple could have combined Trad IRAs worth $1,150,000, and end up paying only $1,900 in Fed taxes on their RMDs.

To be fair, this number will be reduced (perhaps significantly) by any taxable Soc Sec, or other taxable income the couple has.
So, one should do this analysis for their own situation.

But, the real point is that it often makes a lot of sense to leave some money in the Trad IRA, rather that converting it ALL to a Roth.
I am a big proponent of Roth Conversions, but I think there is a point where it becomes "too much of a good thing".

Hope that clarifies what I was trying to say.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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LMK5
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Re: Your thoughts on the teachings of Ed Slott

Post by LMK5 » Sat Mar 23, 2019 8:54 am

marcopolo wrote:
Sat Mar 23, 2019 8:40 am
LMK5 wrote:
Sat Mar 23, 2019 7:34 am
A married couple at RMD age would have a standard deduction $27k, allowing combined IRAs of around $700k. Not exactly peanuts.
Then there is the 10% bracket allowing close to another $500k at a rate likely to be much lower than the one at which one would be doing the conversions.
marcopolo, can you clarify what you mean by the above?
One of the main arguments for doing Roth conversions is to reduce the taxes that would be due when you have to start withdrawing from your Trad IRA at age 70.5+ (RMDs). But, a significant portion of those withdrawals can be done by paying either 0% tax, or a 10% tax. Which is usually much lower than would have been paid to do the conversion from Trad IRA to Roth IRA.

For example, due to the standard deduction ($24,400 for couple in 2019, plus $1300 per person over 65), the first $27k withdrawn from the Trad IRA would be applied against that deduction. At a roughly 4% RMD rate, that equates to a Trad IRA value $675k, from which RMDs could be taken without paying any taxes. The next $19k of income for a couple is taxed at 10%, so, at the same 4% RMD rate, that equates to an additional $475k in Trad IRA.

So, a married couple could have combined Trad IRAs worth $1,150,000, and end up paying only $1,900 in Fed taxes on their RMDs.

To be fair, this number will be reduced (perhaps significantly) by any taxable Soc Sec, or other taxable income the couple has.
So, one should do this analysis for their own situation.

But, the real point is that it often makes a lot of sense to leave some money in the Trad IRA, rather that converting it ALL to a Roth.
I am a big proponent of Roth Conversions, but I think there is a point where it becomes "too much of a good thing".

Hope that clarifies what I was trying to say.
Thank you. Now I see that the traditional IRA withdrawals against the standard deduction are considered, in your example, without any other income. I also now see how you're estimating account balances with regard to the RMD. Now, knowing this, what is the case for Roth conversion at all? I'm assuming any Roth conversions should be done only after you no longer get a paycheck? Is there a big benefit in converting even if doing it in retirement or is the benefit strictly for estate planning purposes?

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Re: Your thoughts on the teachings of Ed Slott

Post by Strayshot » Sat Mar 23, 2019 8:59 am

I think Ed is an expert, and I think some of his advice applies to me and some doesn’t. I pick and choose, but the reality is he is an expert and knows IRA’s inside and out.
I also really like James Lange, his book/s are excellent and would be listed in my top 10 “tactical” finance tomes (as opposed to those that are historical or philosophical). Both are strong advocates of Roth conversions.

I will need to read Ed’s book.

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Re: Your thoughts on the teachings of Ed Slott

Post by Longdog » Sat Mar 23, 2019 9:02 am

LMK5 wrote:
Sat Mar 23, 2019 8:54 am
Thank you. Now I see that the traditional IRA withdrawals against the standard deduction are considered, in your example, without any other income. I also now see how you're estimating account balances with regard to the RMD. Now, knowing this, what is the case for Roth conversion at all? I'm assuming any Roth conversions should be done only after you no longer get a paycheck? Is there a big benefit in converting even if doing it in retirement or is the benefit strictly for estate planning purposes?
There might be no direct benefit to the IRA owner, but if you expect and intend to leave money from retirement accounts to heirs or other individual beneficiaries, leaving them a Roth instead of a traditional IRA is more valuable to them.
Steve

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Re: Your thoughts on the teachings of Ed Slott

Post by marcopolo » Sat Mar 23, 2019 9:56 am

LMK5 wrote:
Sat Mar 23, 2019 8:54 am
marcopolo wrote:
Sat Mar 23, 2019 8:40 am
LMK5 wrote:
Sat Mar 23, 2019 7:34 am
A married couple at RMD age would have a standard deduction $27k, allowing combined IRAs of around $700k. Not exactly peanuts.
Then there is the 10% bracket allowing close to another $500k at a rate likely to be much lower than the one at which one would be doing the conversions.
marcopolo, can you clarify what you mean by the above?
One of the main arguments for doing Roth conversions is to reduce the taxes that would be due when you have to start withdrawing from your Trad IRA at age 70.5+ (RMDs). But, a significant portion of those withdrawals can be done by paying either 0% tax, or a 10% tax. Which is usually much lower than would have been paid to do the conversion from Trad IRA to Roth IRA.

For example, due to the standard deduction ($24,400 for couple in 2019, plus $1300 per person over 65), the first $27k withdrawn from the Trad IRA would be applied against that deduction. At a roughly 4% RMD rate, that equates to a Trad IRA value $675k, from which RMDs could be taken without paying any taxes. The next $19k of income for a couple is taxed at 10%, so, at the same 4% RMD rate, that equates to an additional $475k in Trad IRA.

So, a married couple could have combined Trad IRAs worth $1,150,000, and end up paying only $1,900 in Fed taxes on their RMDs.

To be fair, this number will be reduced (perhaps significantly) by any taxable Soc Sec, or other taxable income the couple has.
So, one should do this analysis for their own situation.

But, the real point is that it often makes a lot of sense to leave some money in the Trad IRA, rather that converting it ALL to a Roth.
I am a big proponent of Roth Conversions, but I think there is a point where it becomes "too much of a good thing".

Hope that clarifies what I was trying to say.
Thank you. Now I see that the traditional IRA withdrawals against the standard deduction are considered, in your example, without any other income. I also now see how you're estimating account balances with regard to the RMD. Now, knowing this, what is the case for Roth conversion at all? I'm assuming any Roth conversions should be done only after you no longer get a paycheck? Is there a big benefit in converting even if doing it in retirement or is the benefit strictly for estate planning purposes?
Conversions make a lot of sense if you have a large Trad IRA (meaning larger RMDs that combined with Soc Sec would put you into higher brackets), AND have a gap of time between (early?) retirement and start of Soc Sec and RMDs, where you will be in a low tax bracket.

For example, in our case, we are in our early 50s, retired, and have a combined Trad IRA in the neighborhood of $1.5M. So, we will probably be doing some conversions in the 12% tax bracket, but we have no plans to try to empty the Trad IRA, or anywhere close to it.

This is further complicated by the rules around ACA premium subsidies, which can, in some scenarios, add another ~10% effective tax to the cost of doing Roth conversions, but that is another discussion....
Once in a while you get shown the light, in the strangest of places if you look at it right.

Miriam2
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Re: Your thoughts on the teachings of Ed Slott

Post by Miriam2 » Sat Mar 23, 2019 2:55 pm

marcopolo wrote: One of the main arguments for doing Roth conversions is to reduce the taxes that would be due when you have to start withdrawing from your Trad IRA at age 70.5+ (RMDs). But, a significant portion of those withdrawals can be done by paying either 0% tax, or a 10% tax. Which is usually much lower than would have been paid to do the conversion from Trad IRA to Roth IRA.

For example, due to the standard deduction ($24,400 for couple in 2019, plus $1300 per person over 65), the first $27k withdrawn from the Trad IRA would be applied against that deduction. At a roughly 4% RMD rate, that equates to a Trad IRA value $675k, from which RMDs could be taken without paying any taxes. The next $19k of income for a couple is taxed at 10%, so, at the same 4% RMD rate, that equates to an additional $475k in Trad IRA.

So, a married couple could have combined Trad IRAs worth $1,150,000, and end up paying only $1,900 in Fed taxes on their RMDs.

To be fair, this number will be reduced (perhaps significantly) by any taxable Soc Sec, or other taxable income the couple has.
So, one should do this analysis for their own situation.

But, the real point is that it often makes a lot of sense to leave some money in the Trad IRA, rather that converting it ALL to a Roth.
I am a big proponent of Roth Conversions, but I think there is a point where it becomes "too much of a good thing".
Marcopolo's point in blue above can be significant. We find that in retirement, we are in a tax bracket ABOVE what we ever were when working up to retirement. These little :moneybag items called pensions, social security, RMDs, and retirement W-2 work are "income" and have propelled us well into the next tax bracket above. We are lucky, we are happy, but it has made the IRA conversion Q more difficult to assess.

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Re: Your thoughts on the teachings of Ed Slott

Post by spencer99 » Sat Mar 23, 2019 6:20 pm

Another consideration I've seen discussed on the forum is that late-life high medical costs offers the opportunity to pair taxable tIRA withdrawals with substantial deductions resulting in little or no tax obligation.

My own situation presents a possible, if perhaps less certain, argument for retaining some assets in tIRAs. A likely heir is in a low tax bracket now and will likely stay that way - quite a bit lower than my current and future retirement tax rate.

And of course, charitable beneficiaries.

S

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Re: Your thoughts on the teachings of Ed Slott

Post by changingtimes » Sat Mar 23, 2019 7:43 pm

I might inject to also look at what taxes, etc might look like if instead of your RMDs coming out against an MFJ standard deduction, there's just one of you with a $12k deduction.

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Re: Your thoughts on the teachings of Ed Slott

Post by teacher » Sat Mar 23, 2019 10:34 pm

LMK5 wrote:
Is there a big benefit in converting even if doing it in retirement or is the benefit strictly for estate planning purposes?

We did ROTH conversions before and after retirement until RMDs kicked in at 70.5 years of age. We made the conversions for the benefit of our heirs, but also to prevent moving into a higher bracket during retirement. The RMD withdrawal is regarded as *income* so your marginal rate can increase, especially if you have a pension plus social security. RMD income can also impact your Medicare costs.

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Re: Your thoughts on the teachings of Ed Slott

Post by 2beachcombers » Thu Mar 28, 2019 2:17 pm

marcopolo wrote:
Sat Mar 23, 2019 9:56 am
LMK5 wrote:
Sat Mar 23, 2019 8:54 am
marcopolo wrote:
Sat Mar 23, 2019 8:40 am
LMK5 wrote:
Sat Mar 23, 2019 7:34 am
A married couple at RMD age would have a standard deduction $27k, allowing combined IRAs of around $700k. Not exactly peanuts.
Then there is the 10% bracket allowing close to another $500k at a rate likely to be much lower than the one at which one would be doing the conversions.
marcopolo, can you clarify what you mean by the above?
One of the main arguments for doing Roth conversions is to reduce the taxes that would be due when you have to start withdrawing from your Trad IRA at age 70.5+ (RMDs). But, a significant portion of those withdrawals can be done by paying either 0% tax, or a 10% tax. Which is usually much lower than would have been paid to do the conversion from Trad IRA to Roth IRA.

For example, due to the standard deduction ($24,400 for couple in 2019, plus $1300 per person over 65), the first $27k withdrawn from the Trad IRA would be applied against that deduction. At a roughly 4% RMD rate, that equates to a Trad IRA value $675k, from which RMDs could be taken without paying any taxes. The next $19k of income for a couple is taxed at 10%, so, at the same 4% RMD rate, that equates to an additional $475k in Trad IRA.

So, a married couple could have combined Trad IRAs worth $1,150,000, and end up paying only $1,900 in Fed taxes on their RMDs.

To be fair, this number will be reduced (perhaps significantly) by any taxable Soc Sec, or other taxable income the couple has.
So, one should do this analysis for their own situation.

But, the real point is that it often makes a lot of sense to leave some money in the Trad IRA, rather that converting it ALL to a Roth.
I am a big proponent of Roth Conversions, but I think there is a point where it becomes "too much of a good thing".

Hope that clarifies what I was trying to say.
Thank you. Now I see that the traditional IRA withdrawals against the standard deduction are considered, in your example, without any other income. I also now see how you're estimating account balances with regard to the RMD. Now, knowing this, what is the case for Roth conversion at all? I'm assuming any Roth conversions should be done only after you no longer get a paycheck? Is there a big benefit in converting even if doing it in retirement or is the benefit strictly for estate planning purposes?
Conversions make a lot of sense if you have a large Trad IRA (meaning larger RMDs that combined with Soc Sec would put you into higher brackets), AND have a gap of time between (early?) retirement and start of Soc Sec and RMDs, where you will be in a low tax bracket.

For example, in our case, we are in our early 50s, retired, and have a combined Trad IRA in the neighborhood of $1.5M. So, we will probably be doing some conversions in the 12% tax bracket, but we have no plans to try to empty the Trad IRA, or anywhere close to it.

This is further complicated by the rules around ACA premium subsidies, which can, in some scenarios, add another ~10% effective tax to the cost of doing Roth conversions, but that is another discussion....


+1
We converted 50% of our IRA's to ROTHs. Objective-control RMDs, Roths to kids, reduce tax bracket creep and tax penalties wrt income.
Ed's Forum and advice(Alan S.-a contributor also to this forum) guided me when I was planning on the conversions. Have read multiple books and articles on the conversion.

Timing the conversions is important for efficient conversion. Our conversions averaged 17% tax and we have been and will probably stay in the 25% (22% w/ 2018 changes) bracket. Knowing your marginal tax rate before and after retirement is a key decision maker. Ability to delay SS to 70. Conversion in low tax years--first few years of retirement, a major charitable donation in one yr. , etc.

Beware of the Medicare, ACA, tax phaseouts, tax penalties due to your MAGI.
Include state tax-we have several friends that are being hit hard in state tax due to their increasing RMDs

Another bene is the residual IRA can be used for LTC--so never pay any taxes on the IRA

A great byproduct of the ROTHS vs IRAs is the ROTH growth is not additionally penalized by increased RMD
Our growth equities are in Roths; REITS, VCIT, utilities, bonds in IRA, Taxable in Munis, TM, emerging.
It's been about 15 years and very happy we made the conversion
Last edited by 2beachcombers on Thu Mar 28, 2019 4:40 pm, edited 1 time in total.

bsteiner
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Re: Your thoughts on the teachings of Ed Slott

Post by bsteiner » Thu Mar 28, 2019 2:45 pm

See my articles on this in the April 2013 https://www.kkwc.com/wp-content/uploads ... r_ATRA.pdf and June 2018 issue https://www.kkwc.com/wp-content/uploads ... ations.pdf of Trusts & Estates.

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Re: Your thoughts on the teachings of Ed Slott

Post by MileKing » Thu Mar 28, 2019 4:29 pm

Have spent a fair amount of time with the Retiree Portfolio Model (RPM) and concluded that aggressive Roth conversions (at least filling the current 22% bracket and perhaps beyond) for the next several years are the way to go based on our circumstances. As others have noted, the combination of social security and RMDs at 70+ is potentially huge. These alone would put us well into the 25% bracket (assuming return to 2017 rate structure in 2026) for the rest of our lives. Utilizing Roth conversions, we’re looking at a scenario where we can sustain our spending at about $1000 more per year than without the conversions, qualify for 2 additional years of ACA subsidies, and maintain a slightly more positive tax profile through age 74. Starting at age 75 we would be in the 0% bracket going forward as compared to 25% without conversions.

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Re: Your thoughts on the teachings of Ed Slott

Post by marcopolo » Thu Mar 28, 2019 8:09 pm

MileKing wrote:
Thu Mar 28, 2019 4:29 pm
Have spent a fair amount of time with the Retiree Portfolio Model (RPM) and concluded that aggressive Roth conversions (at least filling the current 22% bracket and perhaps beyond) for the next several years are the way to go based on our circumstances. As others have noted, the combination of social security and RMDs at 70+ is potentially huge. These alone would put us well into the 25% bracket (assuming return to 2017 rate structure in 2026) for the rest of our lives. Utilizing Roth conversions, we’re looking at a scenario where we can sustain our spending at about $1000 more per year than without the conversions, qualify for 2 additional years of ACA subsidies, and maintain a slightly more positive tax profile through age 74. Starting at age 75 we would be in the 0% bracket going forward as compared to 25% without conversions.
Curious how you are filling the 22% bracket with Roth conversions while simultaneously qualifying for ACA subsidies for a couple more years.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Your thoughts on the teachings of Ed Slott

Post by MileKing » Thu Mar 28, 2019 8:49 pm

marcopolo wrote:
Thu Mar 28, 2019 8:09 pm
MileKing wrote:
Thu Mar 28, 2019 4:29 pm
Have spent a fair amount of time with the Retiree Portfolio Model (RPM) and concluded that aggressive Roth conversions (at least filling the current 22% bracket and perhaps beyond) for the next several years are the way to go based on our circumstances. As others have noted, the combination of social security and RMDs at 70+ is potentially huge. These alone would put us well into the 25% bracket (assuming return to 2017 rate structure in 2026) for the rest of our lives. Utilizing Roth conversions, we’re looking at a scenario where we can sustain our spending at about $1000 more per year than without the conversions, qualify for 2 additional years of ACA subsidies, and maintain a slightly more positive tax profile through age 74. Starting at age 75 we would be in the 0% bracket going forward as compared to 25% without conversions.
Curious how you are filling the 22% bracket with Roth conversions while simultaneously qualifying for ACA subsidies for a couple more years.
I should have been more clear. We are not on ACA yet. That is 4 years down the line as wife still works and we have insurance through her employer. So we have the next 4 years for Roth conversions before needing to limit income to qualify for the ACA subsidies. Without planned Roth conversions, we could still qualify for ACA subsidies but for two less years as we would be drawing down taxable account and need to take IRA withdrawals to meet living expenses.

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Re: Your thoughts on the teachings of Ed Slott

Post by marcopolo » Thu Mar 28, 2019 8:55 pm

MileKing wrote:
Thu Mar 28, 2019 8:49 pm
marcopolo wrote:
Thu Mar 28, 2019 8:09 pm
MileKing wrote:
Thu Mar 28, 2019 4:29 pm
Have spent a fair amount of time with the Retiree Portfolio Model (RPM) and concluded that aggressive Roth conversions (at least filling the current 22% bracket and perhaps beyond) for the next several years are the way to go based on our circumstances. As others have noted, the combination of social security and RMDs at 70+ is potentially huge. These alone would put us well into the 25% bracket (assuming return to 2017 rate structure in 2026) for the rest of our lives. Utilizing Roth conversions, we’re looking at a scenario where we can sustain our spending at about $1000 more per year than without the conversions, qualify for 2 additional years of ACA subsidies, and maintain a slightly more positive tax profile through age 74. Starting at age 75 we would be in the 0% bracket going forward as compared to 25% without conversions.
Curious how you are filling the 22% bracket with Roth conversions while simultaneously qualifying for ACA subsidies for a couple more years.
I should have been more clear. We are not on ACA yet. That is 4 years down the line as wife still works and we have insurance through her employer. So we have the next 4 years for Roth conversions before needing to limit income to qualify for the ACA subsidies. Without planned Roth conversions, we could still qualify for ACA subsidies but for two less years as we would be drawing down taxable account and need to take IRA withdrawals to meet living expenses.
Thanks for the clarification, I thought maybe I was missing something in my own planning.
Once in a while you get shown the light, in the strangest of places if you look at it right.

azanon
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Re: Your thoughts on the teachings of Ed Slott

Post by azanon » Fri Mar 29, 2019 11:19 am

On the whole Traditional vs. Roth IRA (or 401(K)), I"m starting to think the gold standard is to go Roth on both (which would make Ed happy) not necessarily because the math works better for taxes with Roth, rather because you can simply save more in Roths, so maxing Roth(s) is ideal for that reason. Said another way, there is no debating at all that, for example, that 19K/year saved in a Roth 401k is worth more than 19K/year saved in a traditional 401k, because you owe taxes on the latter option eventually.

So try to opt out of the debate by getting to where you can max roths, if at all possible.

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