Hi. Vince Oldre, Certified Financial Planner, and I want to talk to you about the number one tip that can help you save tons of money from taxes. And that is a Roth conversion. Now, it might sound counterintuitive, because when you make a Roth conversion, you have to pay taxes. But let me explain how you will save a lot of money in taxes.
Number one is social security. If you haven’t thought about it, social security is a very tax efficient vehicle because the most you can be taxed on social security is up to 85% at whatever tax bracket you’re in. Now, when you have required distributions, all of a sudden you’re going to have to take out more money, which means more income, which that increases more of your social security as far as being taxable. But if we have Roth conversions, we move money to a vehicle that is a Roth IRA that grows tax-free when you take it out, it’s tax-free. But it also will reduce how much your social security is taxable, and that’s because your social security is taxed based on all your income plus one half of your social security.
We can go into more and more details on how you’re supposed to choose taxable, but if you ever put some calculations together or once you reach age 70 and a half, you might find out how much your taxes have increased, just because of required distributions. The one way you can solve that issue is by doing Roth conversions early and even after age 70 and a half, so you can limit your requirement move distributions, which then in return make more of your social security tax-free. But not only that, you are going to have more tax-free money in the future, but before you do any of this, make sure you’re talking to a CPA, or your tax advisor if you’re going to do these Roth conversions. It’s real important that you speak with a professional about doing this because you don’t want to make a mistake.
Some of the other things you have to think about as well as making sure you know who you’re doing it for. If you’re going to leave all your money to a charity, this might not be the best option. So make sure before you do anything here to help you save a lot of money in taxes, make sure you’re meeting with a professional to be able to do this, or you can do it on your own. But I’m just a Certified Financial Planner, so it’s really important that you make sure you talk to your tax advisor when it comes to making Roth conversions. What we do when we do a Roth conversion with our clients is, we look at a Roth conversion analysis and when we do that we’re looking at not just what your taxes are last year, we’re looking at your taxes three years, five years, ten years out. We’re doing tax planning for strategically and tactically when it comes to your retirement. That way we can reduce your taxes overall, which means you’re going to save a lot of money in retirement.
So if you have a question when it comes to taxes or retirement planning, please let us know we love to do these videos, and I look forward to answering your questions. Till next time I look forward to speaking to you then.