David McKnight addresses three key questions you must be able to answer before executing a single Roth conversion.
Too many people go for Roth conversions without a game plan – this is something that can lead to overpaying taxes and running out of money sooner than anticipated.
David points out that if you can’t answer the three key questions, you should stop and reevaluate because guessing here can cost you big.
“What’s the total amount I should convert from my IRA or 401(k) to tax-free?” is the first and most critical of the three questions.
Remember, the goal of a Roth conversion isn’t to get your tax-deferred bucket to zero at all costs. It’s to get to the right amount of tax-deferred dollars shifted to tax-free, the amount that allows you to stay in the 0% tax bracket in retirement.
“How much should I convert each year?” is the second question and is about pacing your conversion so as to avoid unnecessary exposure to higher tax brackets.
The goal is to convert to Roth slowly enough that you don’t rise into a tax bracket that gives you heartburn.
“Over what time frame should I complete my Roth conversions?” is the third question you should address before executing a Roth conversion.
Addressing each of the three questions helps you shift from Roth conversion guesswork to Roth conversion strategy.
Be careful. Most financial gurus will say “Roth conversions are great, just pay the tax and move on!”
Mentioned in this episode:
David’s new book, available now for pre-order: The Secret Order of Millionaires
David’s national bestselling book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track
Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David’s Tax-free Tool Kit at taxfreetoolkit.com
