64-year-old Couple with $180k/year of Retirement Income (Roth Conversion or No?!)

(don’t forget to checkout the video of this case study too)

💾 be sure to save for later 💾

⭐️ Here are the details ⭐️

✅ Donald & Melania are 64

✅ They have $15,000/month of taxable retirement income ($180k/yr)

✅ They have $10,000/month of guaranteed income from an annuity they just bought

✅ They have life insurance in place to leave a tax-free legacy to their children

✅ They have a remaining $800k in taxable retirement assets (non-annuity)

✅ They already have long term care protection

✅ They will get about $5,000/month from social security

✅ They want to know if they should do a Roth conversion or not

⭐️ What do they owe in taxes now❓⭐️

✅ Only 85% of their social security is taxable so $60k = $51k/year

✅ $29,200 of their taxable income will be taxed at 0% (standard deduction)

✅ $23,200 will only be taxed at 10% = $2,320 in annual federal tax

✅ $71,110 will only be taxed at 12% = $8,532 in annual federal tax

✅ $47,490 will only be taxed at 22% = $10,448 in annual federal tax

⭐️ Total Tax Bill & Effective Tax Rate ⭐️

$21,300 in taxes / $180,000 of income = 11.83% overall effective federal tax rate ️in retirement

⭐️ Should They Do Roth Conversions❔⭐️

Any Roth Conversions that they perform in retirement would be done at a tax rate of 22% or higher…

It does eliminate the risk of rising tax rates affecting their retirement income, so it’s worth considering.

They have the capacity to convert quite a bit of money each year to a Roth IRA (either in the 22% or 24% bracket)…

And all of that money would transfer tax-free to their loved ones…

But, they already have life insurance that will transfer tax-free wealth to their loved ones.

⭐️ Roth Conversion — Yes or No⁉️⭐️

In this case, I would say no. ❌

They’re collecting income at a much lower rate than a Roth Conversion and their RMD’s will not force them into a higher tax bracket.

Also, their tax-free legacy goals are already being covered with a life insurance policy.

Now there are many cases where the Roth Conversion does make sense, but in this particular case, I would say no.

Let’s chat 💬😎