John, very good to see you. I have a question today that I keep hearing over and over again, should I consider a Roth conversion before I stop working Roth Conversions can be one of the best strategies to create tax free income in retirement, and those accounts can grow tax free indefinitely because Roths don't have required minimum distributions. So what are the key benefits of doing a Roth conversion while you're still working versus retired?

Well, I'll say the one key benefit is time. Yeah, I'm time, time, time. So you have, you know, if you're in your late 50s and you start doing these Roth conversions, you don't have to worry about Medicare. And for a lot of people who are retiring even in their early 60s, and they start to do Roth conversions, we have to be cognizant that when you when you claim Medicare at 65 the way Medicare figures out the Medicare premium brackets, or the taxes on Medicare is a two year look back. So if we're doing a bunch of Bucha Roth conversions in 6263 64 you have to realize that your Medicare premiums are going to be affected by that. So if you can start doing those Roth conversions earlier, then you're not going to be subject to that to your window. The other thing is, the longer you get that money to tax free, the longer it compounds and becomes the most powerful money in your portfolio. And then lastly is we want to pay Roth conversions with taxable or after tax dollars, so bank account dollars. So while you're working, you know, you're going to have a lot more disposable income than when you're retired. So for a lot of people, this is an opportunity to where, you know, hey, we have a surplus in income this year. We're going to use that surplus to pay down our Roth conversion taxes.

Okay, now those are some really good considerations. John, what should we take into account when, during our current tax bracket, and how a conversion affects our taxable income?

Yes. So the general rule of thumb is you want to do Roth conversions, or Roth IRA planning, into the 24% marginal tax bracket. You know, for a lot of people, this becomes a sticking point as to why they don't do a lot of Roth planning. You're a high income earner, you're in that 37% bracket. You really have to ask yourself, am I paying taxes if I convert that money now, are taxes going to really be lower in the future, to where maybe I should just delay doing the Roth conversion? So if you're making $600,000 a year and you would want to do Roth conversions, well now you're adding you're paying a 37% tax bill on that Roth conversion. That's where it takes some planning to say, Listen, what is my retirement income going to be? Right? And I'll kind of reverse analyze, say, well, if I'm going to, you know, if I'm going to be in a 24% tax bracket in retirement, why am I going to convert that tax now? Now obviously, Erin, the one big sticking point, and we may have a little bit of a delay here with the tax cuts and Jobs Act potentially be being extended, is what if tax rates are, you know, higher in the future. So that would be my one caveat there, if you're a high income earner. But they're saying, Hey, listen, you know, we're, you know, the politicians are saying we're going to raise taxes and they're going to have to go up substantially because of our government spending and our debt. Then that's the one instance where I tell you, you know, let's start doing some rock conversion planning down.

Right? That is a huge variable, though, but the one thing that's known is that we are living in a historically low tax rate. That's a good reminder. Are there any penalties or limitations when converting tax deferred to tax free before retiring? There are no penalties for doing a Roth conversion. That's we're not doing distributions. We're doing Roth conversions. And I had mentioned time, and I had mentioned this part, as long as you're converting it, and it's really important that people understand this, that Roth IRAs, they have a five year clock on it before you can start making taking out distributions on the interest earned in that Roth account. So getting a Roth IRA account established or doing these conversions earlier also starts those five year clocks, which is important. But as long as you're just converting, there is no 10% penalty. There's just the tax, okay.

What strategies can I use, then to minimize taxes when converting. Should those conversions be timed with other deductions? Yeah.

So again, if you're, if you're young enough, and you have, you know, kids where you have child tax credits, you don't take advantage of those tax credits within within your Roth IRA plan. The other thing too is, you know, if you've had some large deductions that you're doing, charitable deductions a donor advised fund, or if you've unfortunately had some large medical expenses, and then perhaps you can offset some of your Roth conversion with those medical expense deductions or other charitable deductions in that one Year. The other thing I tell people is, you know, for especially for a lot of my retiree clients who are doing this in their their late 50s, early 60s, is if they're claiming standard, perhaps make two years worth of charitable deductions, if they're charitably inclined into one year and do a higher Roth conversion in that year. This way they'll get the higher itemized deductions. The other thing you can look at, and, you know, I've had a couple clients where they've sold their houses, they've done Roth conversions. They've had all these huge tax line items in one year, but then they did a lump sum, donor advised fund and where you could put, you know, a large amount of money on, for example, $50,000 get that deduction, and then you have your charitable contributions that you can make out of that donor advised fund for, you know, the foreseeable future, you know, 510, 15 years.

I love that you were always thinking long term, John, this conversation was really helpful. What I'm hearing you say is, of course, there's no cookie cutter answer, but now is at least the time to crunch the numbers. So if somebody wants to walk through this conversation with you, so many great resources on your YouTube page. But again, if they want to have that conversation with you, one on one, how can they get a hold of you? Yeah, we'll always visit our website, www.gosecurus.com where you can also find a lot of our videos and our podcasts. And while you're visiting the website, just go to the contact us tab, and from there, you can click on a 20 minute phone call where we will answer any general questions for you. Or you can schedule a one hour complimentary vision and clarity consultation.

You great John, thank you. Thank you, Erin.