It makes a pretty significant impact on our estate based on the decrease in taxes by what we do in these 6/7 years. Six figures. Not ‘life changing’ but always nice to be smart about use of money - how one has financial growth and how one manages taxes.
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sry, my reference to ‘life-changing’ was related to the SS form (posted by colorado mom) that one could complete to avoid paying IRMAA. My point was that Roth conversions do not count as a life-charing event per the form, so Roth conversions could put one into a higher IRMAA bracket. If so, that has to be factored into the marginal tax financial analysis on how much Roth $ to convert each year.
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Roth Conversion discussion is timely. Our ds will be returning to business school in the fall, and I have been reading that many young people use the one, full, calendar year they basically only have a summer internship (the calendar year that that includes spring of the first year of business school, and the fall of the second year of business school) to do a Roth Conversion.
I wonder if a conversion at such a young age might bend the rule of thumb about being able to pay the taxes on the conversion from another non-retirement source put forth by @bluebayou
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Yes. When our son was in grad school with only a small stipend, he rolled over his 401k money from previous jobs to an IRA, and then converted it all to his Roth IRA over 2 years while he was in a low tax bracket.
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My suggestion for my kids is to only do Roth Contribution or Roth 401k contribution, in the long run it pays off. They have decent amount already in the regular 401k, by the time they retire, the account can get very big.
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agree with Dr. Google.
Kids should almost universally be putting their cash into Roth or 401k with a Roth option, and forego any pre-tax benefit today. The only exception is if they are making bank in an extremely high cost locale such as NYC, where marginal taxes can easily exceed 40%. Unless they are New Yorkers thru and thru, they’ll eventually end up in a lower tax place, so take the pre-tax benefit today.
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If you’re asking if it would be a good idea to do ROTH contributions or conversions during a time he’s not making much, I believe the answer is absolutely. BUT, keep in mind the amount he converts will be taxed at whatever his rate is including the conversion amount, so he needs to make informed conversions.
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For many years I’ve thought Roth best choice for young people. We kept all our work contributions as traditional IRA. It just seemed simpler to have all same kind. Now that we are retired and using advisor services, we’re sorting through options to convert some to Roth (starting with husband, 7 years older).
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My daughter puts everything she can into a Roth. At her last job, I think she needed to put some in a regular 401k to get her companies match. She changed jobs and I’m not sure what the new companies rules are.
She would not have much to convert.
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It seems like with as long as they have until retirement, unless “kids” are in high tax brackets it makes sense for them to do Roth as much as they can. That’s what I’ve advised my kids to do.
As you probably already know, as we get older, and when we are talking conversions and bumping up against Medicare years, it’s a tougher decision.
ETA - sorry, didn’t mean to reply to @deb922.
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Wondered if I could ask - since so much of this thread is above my head (
) I’ve been looking into financial advisors who can can give my family some holistic advice (i.e., timelines to retirement, what we’d have to do to retire X years earlier, is LTC insurance worth it, etc.). The ones I’ve talked to who come highly recommended would need us to be clients (i.e., invest at least $50k and let them manage) before they could use their sophisticated software to help us plan our multiple scenarios.
Wondering - would paying someone a flat fee of a few hundred dollars for a holistic overview/multiple planning scenarios be helpful? I’ve heard all sorts of advice about making sure the financial planner is “on your side” (Fisher Investments?) but not even sure if a commission based plan ensures they “are on your side” - i.e., how to know?
I know this is level 1 basic info; but would appreciate any thoughts! 
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I’m pretty sure my ds has made Roth contributions in the past, but his income over the last two years has been too high for them. He does live in a high-cost state (CA).
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@Hoggirl, Google “backdoor Roth.” It’s a perfectly legal way for folks who earn too much to contribute directly to a Roth IRA to get money in a Roth IRA via contribution to a traditional IRA and immediate conversion. There are no taxes due from the conversion, as long as you don’t have pre-existing money in the Traditional IRA. Proposed legislation may eliminate the ability to do this, but for now it’s still available.
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@Jolynne_Smyth I’m sure many of us feel the same. We manage our own money but we have friends who are financial advisors who offer their services for a percent. We have a friend who can help us get a great mortgage if we move a large sum to his bank. We don’t need the mortgage so haven’t done so.
My kids all have a Roth IRA. I don’t know how often or how much they contribute. My son also has a 401k he contributes to. My question is he also contributes to an HSA. He now has accumulated quite a bit in it and has used very little. At what point should he cut back that contribution?
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A flat-fee visit was really helpful to us. Dh wanted to retire, I didn’t think we could afford that, and she told us how we could make it happen a couple of years later. It’s super-helpful to have an objective party look at finances and sparked lots of good convo between dh and I. Also forced us to really look at our expenses instead of just guessing what we spent on everything. Highly recommend.
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Keep maxing out HSA until he retires. HSA’s are essentially triple tax free, (except in CA and NJ).
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I’m unable to convince my children to contribute to HSA, but at this point I leave them alone, they are contributing to retirement on a regular basis so I’m happy about that.
Our HSA is through Health Equity. They charge .03% in monthly admin fees. I am trying to transfer the money to a Fidelity HSA which does not charge fees. HE is making it difficult but I just need to call.
If you have your HSA through HE, you can open and transfer your money to another company.
I wanted to tell people that yes HSA’s are good, but to check how much they are charging you to administer the account.
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@Jolynne_Smyth, there are fee-only planners who do a good job. I don’t know how to find one, other than to ask around. We put off using an advisor for probably too long (we would have fared much better in the late 2000’s if we hadn’t waited). When we started with him, we didn’t have him handling any assets. We paid him a very reasonable quarterly fee to advise us on our 401k’s and help us with a retirement strategy. Later, we had him begin actively managing IRAs for us. We pay less than 1% of our assets under management, and our investments are in funds that don’t have high fees. Our advisor is a fiduciary, which is something to look for. He is also a Certified Financial Planner. He was highly recommended by a number of people my H worked with, from technicians to upper management. We have been very pleased with his services.
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@Jolynne_Smyth: Try goggling Garrett Planning Network to find a local CFP professional who will charge only hourly or by the project. No need to have them manage your financial assets (many won’t anyway), and they won’t charge you commissions nor work with those who do.
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