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Peter, hello. So good to see you and welcome back everyone. Let’s talk through the best times to consider a Roth conversion. The writing is on the wall though, Peter. According to Fidelity, Roth IRA conversions jumped 41% in the first quarter of 2026 compared to the first quarter of 2025. Let’s talk through precisely when you should consider a Roth conversion and just a quick note to everybody watching, we’re going to make a separate video on the times to not consider a Roth conversion.
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Before we jump in though, explain what a Roth conversion is and why they’re so popular right now. >> Well, just because people are doing more of them doesn’t mean that people are doing them correctly or optimally or timing them right. I mean, even the fact that this was done in the first quarter of the year indicates to me that maybe we need to talk about when and how to execute on Roth conversions a little bit more specifically. Not necessarily that that’s wrong, but just that we might
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want to wait till more of the year transpires to make sure that we are making a good choice there. But a Roth conversion is essentially moving money from your left pocket to your right pocket. Now, in your left pocket, you may have saved the money in a tax-deferred account such as a 401k or an IRA. And in your right pocket is the Roth account. You are transferring it between them, but on the way, you are going to have to pay taxes. So this is not brand new money into a retirement account. That is a contribution.
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This is converting over the type of account that these dollars are living in and there’s actually a few less restrictions and rules on conversions than there are on contributions. So people are more free to convert over more money at any given time and because of that, there might be a few more mistakes in that jump in the number of people who are doing them. Again, not that it’s wrong, just that you definitely want to double check those things. >> Right. Okay, so let’s get into the four
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times that you should consider a Roth conversion. First is when you are in the window between retirement and RMD age. Why is this timing ideal? >> Well, Ed Slott, who is a CPA and he has been dubbed as America’s leading IRA expert by The Wall Street Journal, said that this was your window of opportunity. Now, it’s not without some caveats there, but generally between retirement and RMD age, you might have a little lower income, taxable income, because retirement is not about reproducing 100% of your working career
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income. Retirement is about withdrawing only what is necessary from your retirement accounts and trying to preserve and protect the rest of them so they continue growing. Well, by doing so, we might be in a lower income and a lower tax bracket status during this period between the end of our working career and RMD age, which is required minimum distributions. That’s when the government starts requiring you to pull out of those IRAs if you are not already doing so. And thank you, Aaron, on the screen. Ladies and gentlemen,
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you’ll see the tiers for when those RMDs would begin based on your year of birth. So, it has been moved back from 70 and a half all the way up to 75 if you’re born in 1960 or later, but just because you can defer to these ages does not necessarily mean that it’s the best thing to do to defer and therefore default to the IRS’s collection plan for your dollars. And that’s why during this window of opportunity, it’s a good time to consider making these Roth Roth conversions. We have some cool software
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that can project out what those RMDs will do to your tax status and tax bill, and then can show how doing Roth conversions in the interim years can bring that total lifetime tax bill down, usually pretty substantially. I’m It is It is kind of shocking and eye-opening to see those numbers side by side. Uh what the IRS is planned to collect is, and then what you could proactively manage that and bring it down, too. However, Aaron, in this window of opportunity, it’s not without some caveats because you do also need to
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worry about those tax brackets. Obviously, you don’t want to bump yourself up unnecessarily, and you need to worry about your health care premiums and and and Medicare premiums for part B and part D. And a Roth conversion could cause you to encounter IRMAA. You want to try to avoid that, uh potentially, if you can. >> Mhm. Okay. Next time to consider a Roth conversion is if you expect taxes to be higher in the future. >> Yeah, ra- ra- raise your hand if you don’t expect that to happen, right? No
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hands go up around the room. Look, uh I I I think most people I talk to are expecting that taxes will go up at some point in time. Um we spend all of the tax revenue that we bring in before Congress even sits down and whispers about spending money. And man, do they like to talk about spending money. So, we are in a historically low tax environment right now, currently, and with the uh one big beautiful bill, the extension of the 2017 Tax Cuts and and Jobs Act, those rates are in place. Air quotes here, ladies and gentlemen.
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You can see it on the screen there that our our marginal tax rates are lower, but the average tax rate is actually historically low. But, air quotes here, that one big beautiful bill made them permanent. Um they are not so permanent. There are several aspects of the one big beautiful bill that have sunset provisions that will expire. And the tax rates are only permanent until Congress, who has an eraser, comes around and decides to change them. And because other provisions have that automatic expiration date and sunset, Congress is
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going to be awfully motivated to come around and and change them. And due to the fact that we continue to over and outspend our revenue and our intake, I think we’re we’re going to have to take them at some point in time. Um It it There’re There’s just so many reasons why taxes would be higher in the future than they are today, I think. >> Right. Well, and I mean, you’ve touched on it. So, I mean, this one is kind of hard to unravel, so let’s do it in a little bit, which is you touched on we
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are living in a historically low tax rate now. So, pay your taxes at a known tax rate while they’re low. But, let’s jump into a couple more reasons about why they would be higher. And I mean, let’s just take the most recent headline, Peter, that our national debt hit $40 trillion. So, why does that mean taxes would likely be higher in the future? >> In the midst, Erin, of the government simultaneously collecting tax dollars from three separate generational demographics. Um we have the retired
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demographic who is removing dollars right now in retirement from tax-deferred accounts. We have the working demographic who is paying income tax on their income. And we have the demographic of savers for the future who are now saving more in Roth accounts and doing these Roth conversions. So, the future retirees are also all paying taxes simultaneously and yet still we can’t balance the budget and the deficit has surpassed $40 trillion and we now spend more than a trillion dollars just in interest on that debt
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alone per year. That is a big portion of our annual non-discretionary spending. So, interest on the budget, social security, and the entitlement programs, these are things that are are are non discretionary, non-debatable. Congress doesn’t sit down and talk about spending on these things. That’s other items, but the fact that all of our revenue is is eaten up and then some by just non-discretionary spending, Aaron, really indicates that at some point in time we are going to see tax rates
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increase and change into the future. >> Mhm. All right, back to our third reason then to consider a Roth conversion, when you should consider one, is if you have children and you want to leave them a tax-free account or a tax-free legacy. >> Yeah, we hear about the tax-free growth and the tax-free income, which obviously are beneficial, but there are so many additional benefits from Roth accounts. Now, there’s a cost on the front end and that that’s what we’ve got to weigh,
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right? The the cost-benefit analysis and and how to do these effectively, but for survivorship income, it’s not actually just the next generation, Aaron. It is your spouse. If you are married when when one spouse passes away, the remaining spouse starts filing their tax returns as a single head of household. Well, that’s what’s known as the widow or widower’s penalty because they bump up in their tax brackets, meaning they pay higher taxes for the same amount of income. They also have lower Irma
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thresholds, meaning that they could encounter those increased Medicare premiums. Um by having withdrawals from a Roth account, you can potentially avoid some of those widow or widower penalties. You can potentially avoid some of that Irma surcharge. And then of course, leaving the account to the next generation, it is a tax-free legacy to your beneficiaries. It is still subject to that 10-year distribution rules. Uh the the government wants that money back in taxable circulation, so they they do
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require that a next generation beneficiary 100% completely liquidate the account, even if it’s a Roth, within 10 years. So, there are some still some rules and some stipulations, but if you want to disinherit the IRS or control how much of your estate ends up in the IRS’s hands, doing strategic Roth conversions is one of the best ways. And we are in the midst, Aaron, of what has been dubbed as the great wealth transfer. It’s expected 90 trillion dollars that is anticipated to change
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generational hands over the next couple decades. And unfortunately, due to lack of planning, I think about a third of that is probably going to go to the IRS. Maybe a third of that to nursing care, medical expenses, and then a third will end up in the intended beneficiary’s hands. But if we do some pre-planning effectively with tax and Roth conversions, then we might end up disinheriting the IRS a little bit more. Between two beneficiaries, if you’ve got two kids, Aaron, leaving a a sizable IRA
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to the two kids, your third beneficiary, the IRS, probably actually is your largest beneficiary with tax-deferred accounts. If you don’t If you don’t control it. >> Yeah, that math is scary. Yep. All right. then the last time to consider a Roth conversion is if the market is down. Why does it make more sense to do a conversion if the market is down and down by how much, Peter? >> Well, it’s a little bit of a feeling like you’re pouring salt in the wound here, so to speak, because the market’s
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down and now I’m >> some tax. >> Yeah, I’m I’m going to opt to pay tax taxes optionally, um voluntarily, extra ahead of time, but it is strategically advantageous because if you had slated that I was going to convert over $50,000 this year, let’s let’s just call it as an example, and therefore I’m prepared to pay this much in tax on that conversion. Well, if the market goes down by 10 or 15 or 20%, that same dollar amount represents a larger percentage of the total tax-deferred
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balance, and if you get it over in the midst of that downturn, when the market eventually recovers, we we hope that happens, then it’s recovering on the Roth side, rather than in the tax-deferred side. So, yeah, it is it is strategic, and I have people ask me about the timing on this, and well, then when can I use that Roth money? The value of the Roth conversion is not in the conversion itself. That’s the cost part of it. The value of the Roth conversion is in the growth that happens thereafter. It is the subsequent growth
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that happens that gives us the advantage. And and therefore, when we make that Roth conversion, ideally you don’t want to touch that money for a period of time. That that should now go kind of last in order of when to access money to allow for the advantage for the cost that you paid, which is the growth that will happen. >> Mhm. You know, it’s interesting to talk this through, Peter, because I I really do feel like everybody’s talking about Roth conversions right now, and there are
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good times, bad times. So, again, if somebody has found us on YouTube or otherwise about the best times to do a Roth conversion, on the other hand, we are posting another video, the worst times to consider a Roth conversion. But, as you mentioned, Peter, this is going to be specific math for everybody’s unique financial situation. On that note, if somebody would like to crunch the numbers with you, how can they get a hold of you? >> Well, we put a plan together for all clients, and it is a complimentary
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courtesy service for any viewer or listener of the program that we will put together, that optimized retirement plan looking at income, investments, taxes, health care, and legacy. And And this is a big part of that tax pillar. And if you’d like to get your optimized retirement plan put together, again, no cost, just give us a call or shoot me an email, or go on the website online. Uh you can reach the office at 919-300-5886. 919-300-5886. Uh you can go online, RashonPlanning.com. It looks like Rich On Planning. Rashon
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is my last name. It looks like RichOnPlanning.com. Uh you can email me, Peter, at RashonPlanning.com. >> Okay. Peter, thank you very much for your time today. I appreciate it. >> Absolutely. Hey, Aaron, I want to mention here, we do have a handy online retirement tax bill calculator at 919retired.com. You can put in numbers, crunch your own numbers, and kind of see the difference between the IRS’s plan versus opting into your own plan for controlling these taxes. So, that’s a great tool online,
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as well, 919retired.com. >> Great. Peter, thank you. >> Thank you, Aaron. >> The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax, or legal advice from an independent professional advisor. Any investments and/or investment strategies mentioned involve risk, including the possible loss of principal. Advisory services offered through Brookstone
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Capital Management, a registered investment advisor. Fiduciary duty extends only to investment advisory advice and does not extend to other activities such as insurance or broker-dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.
