The Big Picture Retirement Show does not provide tax, legal, or financial advice. Listeners are encouraged to seek out their own advisors in these areas.

Hey, everyone, welcome to the Big Picture Retirement Show. I'm your host, Devin. joined today by John Raltz. Howdy.

John, one of the things I get asked about all the time in just about every conversation I have about retirement planning, it's, you know, I've been thinking about Roth conversions, Devin, and whether or not I should convert.

But I'm having a hard time figuring out, you know, the mechanics of

it and does it really make sense? Fair enough. Because it is a tough conversation. I mean,

the basics of a Roth conversion are that you take money you've put in a pre-tax account, IRA or 401K,

and you move that to a Roth IRA. That's right. For every dollar you move, pay some tax on it. That's right. It creates a dollar in taxable income. So needless to say, if you've been working for a while and you have a balance saved up in your IRA, this could become very expensive very quickly. It can move you not only through the tax brackets and make you pay a lot of federal income tax, but if you're in a state where there's also state income tax,

it will affect you there. If you're over 65, it's also going to drive your Medicare premiums up

likely. If you're under 65 and say you're on an ACA plan, it may disqualify you from any help

that you're getting there. Now, if you're still working, you've got income coming in, so it may not make sense to convert at all there. So, I mean, there's a lot of different factors to consider here. Absolutely. Yep. So when you're looking at a Roth conversion, you've got to count the total cost of the conversion. And that's one of the first points here is not just the tax cost. You've got to count the total cost. The only way I know to do that

is to get a baseline plan completed that does not have any of those optimizations, like a strategic

filing for Social Security or a Roth conversion added in there. Just a very simple, plain plan.

Baseline retirement plan. That's it. That way you can look at what's the tax cost and how does this affect my retirement account balances. Then you can start to layer in things like the Roth conversion to get a real idea of the true cost, right? That makes sense. And the majority of that's going to have something to compare, right? I mean, you've got to have an A to compare to B. That's right. So this is something that we look at in every retirement plan that we do. And now my team has done, I don't know how many of these retirement plans, these retirement roadmap plans. We talk about them all the time on YouTube. It's where we take financial planning software that everyone in the industry uses, but we do it a little

differently. We don't print out the 50, 60 page report, put it in a nice binder, which I saw one of

those just today, by the way. Did you really? That was beautiful. It had a hard cover on it with

gold letters that they printed. Man, they paid for the extra binder. They did. Yes.

It was nice.

And it had all the obligatory pictures of the couples in the Adirondack chairs.

It's always, or are they holding hands?

And the light, absolutely.

You know they were.

With a glass of sweet tea or a lemonade, I think it was.

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