Here, to talk about Roth. Conversion sets are 15 minutes. I’m going to turn off my video right now. I’ll get you squared away. So you can concentrate more on my slides and less on me.
Let’s take a look. Everybody. There is the coffee going.
Hopefully, you got a cup of coffee there.
We’re going to talk about Here’s something that needs to be done before the end of the year, or we know the taxes are today.
We didn’t know what the taxes are tomorrow.
And so, let us, please, Let’s figure this out.
First pair, we want to talk about it, Roth.
We’ll talk today. What is a Roth Ira? What is a Roth conversion?
Roth conversion pros, Roth conversion Kahn’s, and how Roths work?
So, Roth IRA is a special retirement account.
So using post-tax dollars that’s money you actually have in your wallet and provide it in a given year.
You haven’t earned income.
You are able to contribute to this subject to the salary limit.
So if you’re Single, that’s 124 to 139 a year Adjusted gross income, AGI.
Married, filing jointly is 196, 2. Oh, oh, two. Oh, six.
Now you would think, geez, the font, single.
I’m single, you know, I get this number here.
You would take 124, would be 2 48.
Ah, but we don’t see that joint owners to us six.
Hmm, hmm, hmm, hmm.
That’s called the marriage penalty.
You would think you would be a single person times two, right?
I’m drawing with my mouse here, times two, But it’s not.
So if you don’t know these numbers, they’re important numbers to do.
Roth is also subject to a five year rule. You have five years from the date that you started, not the date that you have, it, the date that you started.
You have five years to do something.
If you take the money out after five years, then you’re good.
So, if you started at age 57 and you could take money out of an IRA at 50, 9.5, then you still have to wait till 62 in a Roth IRA if he did it at age 57.
So, important to know that that’s my cell phone ringing, but we are busy right now.
So as you can tell, the day is getting busy without starting no required minimum distributions.
Roth is subject to a five year rule. There’ll be no R M Ds that we know are the needs for the future.
So, which is great, because normally you’d have to take out of R&D At age 72. Used to be 70.5, now, it’s age 72.
So we don’t have to do that. That’s great, Lovely stuff.
What is a Roth IRA? Conversion? Conversion is simply changing the account. Classification from a traditional IRA.
Tour wildfire array.
Um, in the beginning of 2010, the federal government than allowing investors to convert the traditional IRAs, Roth IRAs.
Regardless of the amount of income they earn, so then 2010, before that you should be set subject to how much money you can never, ever convert if you made too much money because Susan benefiting the rich.
Government said, You know what, we’re going to go when we’re not gonna have a salary cap on that conversion.
That’s where the conversion is. So, now there’s no salary. People asked me that all the time.
There’s no salary cap to convert it, so, let’s talk about it.
We’re missing a slide here that I would want to have maybe got lost in translation.
Wish I had a slide says, contribution contribution to a Roth IRA are the same as a contribution to a traditional IRA.
You need to have earned income in the year that you have to contribute to convert.
To convert, you don’t need earned income.
The difference, the two seas contribute and convert.
You need an earned income to contribute. Now, can your question came up? And I see it. Thank you very much. By the way, you know how to ask questions.
And, we can always open up your microphone should you need, but you can ask questions. Our video is just right here in the question area.
And the question is, if my wife works and I don’t work, I don’t have unearned income.
And that’s true. You do not have an earned income.
But if, if you’re married and your wife works, you could still contribute based on her salary.
Now, if she works, and you’re over 50, you can contribute 7000 for you.
Let’s say you’re retired and your wife’s a teacher, and she’s still working. She’s waiting for her day to retire, And she’s making, I don’t know, 90,000, so you can contribute seven for you.
And your wife could contributed 7000 for her in addition to a 403 DB plan that she has as a teacher.
So the total of the 19th of 790,000 earned income coming in you cannot deduct the 7000 off of that income, But you can you’re able to sock away 14 K.
Drawing with my mouse, so please forgive me 14,000. Let me make that a little better.
So, you can contribute 14,000 for 2020.
Could do that again.
Now, these are the rules, based on what we have this year, based on everything that we have going force, this could disappear.
Next year, do not know, I don’t know, Molly speaking for this year.
It’s going to depend on what can be politically done, and the only people that could change laws like this would be Congress. Congress has the power of the purse.
And they also have to be approved by the executive, which would be the pres.
Roth conversion, so why would you convert? Well, you pay the taxes, now. We know what the taxes are this year. Which is why? We Have until 12 31?
By the way, when you write 20, always write 20, 20 because somebody can always add 20, 21, tier 20 if you just stop at 20, it’s always write 20 20, all right? So, your account could grow, you know. Obviously the 1099 each year. So, whatever money you make we have a roaring market. Think of all the people that converted last year were able to pull out, you know, 6, 8, 30% this year and they keep every penny of that. How awesome is that?
There’s no required minimum distributions, we’re holding it for five years.
And if you take the money out after age 59.5, you do not pay any taxes for the rest of your life.
I’m much out there, like that.
There’s no age limit to making a conversion. You could be seven years old and converting.
Not a big deal, And there’s no conversion restrictions for employee plans, employer based plans.
So, if you have a 401 K, or 403 B, or 457, if you’re a state worker, or teacher, or law enforcement force of 57 plan, as long as you don’t extend the IRS’s income limits, you can still contribute in addition to in addition to the, uh, in addition to, anything else you have going on in the 401 K, for all three week.
So, that 7000, if you’re age 50 or older, we kinda discussed that, No taxes for your beneficiaries.
Now, here’s the thing, if you inherit, if you have a million dollars in a Roth IRA, and you pass your beneficiaries, which could be your spouse, or it could be your code, or it could be anybody else, would receive a tax free, that’s a home run.
I think, you know, these are things, this deal is so good that it’s my belief that it could be on the chopping block in a different, in a different situation politically.
So what’s the cons? It sounds too good to be true, Craig, what’s the cons?
Well, the con is, you have to pay the tax on the and the conversion when you do it, in the fiscal year you do it. So any conversions that we do now until 12 31? I’m like, alright, then up again, let’s just go 12, 31.
Will be handled on year 20, 20. 10, 40.
How is that going to be shown, on your 20, 40,000, 40, 2000, 2010, 41 boy, this is terrible. It’s gonna be showed as, oh, I know, Sorry against my mouse.
So, if I made 90,000, Can I convert 20 K?
That’s gonna cut, it’s gonna show me, as it is just the gross income of 110,000.
OK, can, of course, the salaries are higher, you just store whatever you convert, gets piled on, now we have some mapping programs that we actually put your, your 2019 tax returns.
Let’s turn on the video here, just, so we have some mapping programs, where we actually turn on your 29.
Oh, look, I drove myself here, where we turn on your tax returns, and it lets us know that any withdraw from your Roth IRA, we want to do it under the salary limit. So it doesn’t get you to the next tax bracket.
And that’s critical, so that’s important information to know if you could do it, under the, under the, if you can contribute, pay the taxes, no knowing what the taxes are, but as long as it doesn’t kick you to the next tax bracket that our clients have found that that is very useful, we have this. It’s called Tax Mapping Software. We could play with the numbers before we actually do it. We actually have a CPA here and in the office, so I could also call her into bare if you want to do a full audit of what your tax returns. This is already December. So, anything that she does would probably be very equivalent to what your tax return would be in just a few weeks. So, it doesn’t hurt to get it done now, she just charge a little something, but it’s a great, that’s a great thing to have now. And so then, once we have that information, and then we know how much we can convert, and it’s not about, Well, I think you’ll do better. Now we have the tax return. This will tell us exactly what it’s gonna look like for next year for you. So, I think that’s critically important, because a lot of people, a lot of advisors, and this is kinda say, Yeah, maybe you should do, and even accounts, they go, Well, you know, you gotta pay the taxes this year, and that’s not OK. So, what are the tax is going to be next year?
Can anybody tell me, are the types is going to be lower or higher next year? What’s your best guess?
I wish I’d throw out a survey so you can answer the question, but I won’t I think people think the taxes may be the same or going up next year through the C OK. Well, we did some things this year, we could do some things next year.
If they’re going up next year, then you may want to convert this year.
Given all things being equal, you may save a few dollars, all right. So I’m going to take the video off here, I just wanted to talk to you about that.
Um, so, you must wait five years to take your tax free withdrawals, that includes so that includes anything like, let’s say I have a dividend, Let’s say a British petroleum, which is paying 7% dividend, I have 100,000 BP.
And it’s pink, so let’s make it 8%, 8000 divide that by four. That’s 500.25, that’s saying, to do this. This is a recommendation to, by BP or anything else. We have British Petroleum. The price of courses, You know, fluctuates paying 7% dividend.
If I hold it in my account joint with my wife, well, you know, I did some percent minus taxes.
See where I’m going with this, right?
Sounds horrible taxes.
If I have it in my Roth IRA, I’m getting 7%, and I am required, that’s held it for five years, at least how open the Roth IRA for five years.
I get asked the dividends VP to my house, and now I’m getting 7% tax free.
How awesome is that?
Tax free income, off of the dividend, you can substitute this name, your Con Ed. I don’t care Exxon Mobil.
You know, you can just think of any day Hawaiian electric, there’s one like, you know, E, know, why and electric pays a dividend, the only utility on Hawaii, so, you know, these are things that are very, very important. Anything I have in the Roth IRA, if I wanted to live on income and for it to be tax free, it’s nice to get some of the phase, a decent dividend and his tax rate, All right.
What questions? have you got? Any questions? Please send me a question.
I’m thinking here, what does it take to convert to a Roth IRA? Good question. Thank you for that.
The, you will take your current IRA, traditional IRA and you would fill out a form and then the question is when do I want to do withholding?
Yeah, you would, we would work on that.
And we would say, OK, I want to do with holding this year, or do you want to take the money for converting 20,000? Do you want to put 5000 aside and convert the 15,000?
Or do you want to convert the whole 20,000, and then add it to which you’ll owe the IRS next year, generally by April 15th. So you can make the conversion now, have, have some decent, maybe possibly some growth. We don’t know what the mark could be losses to don’t know that answer, and then convert, but that’s, it’s critically important to start doing this. We know what the taxes are this year. This is important. Hey.
It’s it’s been useful to you guys raise your hand if this has been useful You’ve got a better understanding of how a Roth works.
You have another question coming in real quick, and then we’ll call it, call it a day for now.
If my raw, if I’ve converted to a Roth IRA and I’m, and I’m 57, if I don’t wait, can it OK? So can I, the question is, can I take the money out?
if I’m prior to the age of 59.5, And the answer is yes.
You can take the money out, of course, but it won’t be tax free, so if you didn’t do your five years time, you’re gonna go in jail for five years from the time that you initially start a Roth IRA.
You gotta wait five years, once you take the money out, it’s all yours to keep for the rest of your life.
All right. I thank you all, for we’re interested in for our financial … 15. And we look forward to see you be on the lookout for your $5 Starbucks gift card. And if you want to see how this works, few, call my office for, and we’ll have a chat with you, and figure out if we can help you are not an answer any specific questions you may have.
Alright, Thank you guys, have a great day, and we’re on to a good trading day, hopefully. Alright, bye, bye.