The Sweet Spot in ROTH IRA Conversions and Chunking - YouTube

Hi, Mark Kohler here best-selling author, radio show host, CPA, and attorney, talking

to you about the ROTH conversion, That's right I'm not a financial adviser I'm

not going to tell you to buy some of my investments are stocked I am a tax

advisor helping you build wealth I'm a lawyer

trying to protect your wealth and I want to bring it all together so I'm going to

talk about something no one's talking about on YouTube and that is the proper

way or time to convert a traditional IRA to a Roth because there's some gaps in

the tax bracket and I want to expose it and show you where the perfect sweet

spot is for that transition all right so here's my handy-dandy whiteboard and

many of you that have watched other videos of mine you know what I'm talking

about here you got to go watch the videos on why Roth is so cool compared

to an IRA or a 401k and how you can have a Roth inside a 401 K topics for another

video of mine but this is our picture right we got operations we've got our

trust and we've got investments and right here I've got my after tax and pre

tax buckets and I want to take my IRAs or old 401ks that are in an IRA position

and move them over to a Roth slowly but surely we call it chunking I want to

chunk it that IRA and move it into a Roth position which now allows me to

drive a faster car and self-directed and get ten fifteen percent returns on a

regular basis or greater which I know is heresy for some of you that makes you

very mad to say that I would even assume you could do better than eight percent

in a Roth oh you can watch my other videos Roth IRA 1 million dollars mark

Kohler you'd love them part 1 and part 2 so what we're trying to do is talk about

this Roth conversion in the right spot okay so here's in this first chart we're

gonna talk about you single folks out there and where's that sweet spot for

the Roth conversion alright now this is what I want to expose there's seven tax

brackets and that's cool we can talk about all the different rates but

there's really two gaps no one's talking about right between the 12 percent

bracket in the 22 percent bracket is it 10 percent jump if you make too much

money over this level BAM you go into a higher bracket also there's another gap

right here at the 24 to 32 percent there's an 8 percent jump so think about

if I'm going to convert to a Roth now what we do by that is we're taking a

regular IRA that might have a hundred thousand dollars in it and I'm gonna

convert that to a rough now the day I convert it to a Roth I've got to pay the

tax on that conversion that's cool no penalty I'm just gonna pay the tax I can

keep the same type of investment in that Roth or I can move it to a self-directed

Roth custodian trust company whatever got lots of that to talk about in other

videos of mine but the minute I convert that BAM I pay tax so if I'm

at a certain income level and I convert 50 grand and it puts me into a higher

bracket a 10% higher bracket I mean I want to do that I may want to chunk at

the right amount to keep me in that lower bracket and then wait until next

year if I know where my bracket is and make sure I expose these two sweet spots

before my bracket jumps fair enough here's an example let's say I'm making

less than $40,000 we're right there that is a huge sweet spot because I'm gonna

be in the 12% bracket or less now I know some of you that are making 40,000 or

less or like I don't have time or money to convert to a Roth IRA right now I'm

just trying to make ends meet I get it but I'm just showing you this is your

first sweet spot because I'm under 12% so if I convert a hundred thousand

dollars like well I'd get into a higher bracket at that point let's say I

convert ten thousand dollars and I'm in this bracket and some of you may have

real estate losses that are bringing you down into the slower bracket you may

even have more wealth than you realize and be in this bracket so you want to

talk to your tax accountant and go yeah where am I at

so if I converted ten thousand dollars I'm only paying twelve hundred dollars

in tax because I'm in this bracket this sweet spot

now where's the next one well after twelve percent whoa I jumped all the way

up to twenty two percent so if I'm in this range I might want to play in this

area right here this is the playground I want to be but if I'm making okay mark

I'm making some more money I'm making eighty four thousand dollars or more

well look at this sweet spot it's a big one right here easy to find sorry all

these innuendoes I need to watch out for some of your maybe laughing okay so this

one's easy five between 84 to 160 here's my sweet spot I'm gonna only pay a

twenty two to twenty four percent tax rate but once I hit 160 grand I jump all

the way up to 32 percent I don't let that so for some of you that are in this

single area 84 to 160 you've got a really nice spot to be converting money

to a Roth and know that you're gonna stay between a 22 and a 24 percent

bracket very easy to calculate but look at your w-2 and don't convert anything

that's gonna take you over 60 ok let's talk to the married folks

okay now I married folks this one is very similar as well but we're dealing

with greater numbers because you're married so there's possibly two incomes

and the families so the brackets are they don't kick into a higher level

until a higher rate of income because there might be two incomes get it right

married filing joint okay so if I'm here this 12% area is all the way up to 80

grand where it was 40 for a single individual now I'm just rounding up it's

there's some fine print seventy nine whatever but this is about where we want

to be in this eighty thousand dollar range I'm only gonna pay twelve percent

on that conversion so again if I convert ten thousand dollars of my old IRA to a

Roth I'm only paying twelve percent in this range that's cool cuz I may have

again other write-offs that get me into this range but then I'm in this no-man's

land for a while and I do not want to convert any money between 80 and 170 to

a Roth potentially because it'll bump me all the way up to a 22% bracket now that

that's a big jump this is another 10% jump well this is this six I'm sorry 8%

jump right here so why jump into this no-man's land if I can stay over here

now if you're already making enough money that you're in this no-man's land

you want to convert and but not do any more than 320 1,000 see in this this

area of we're getting a twenty two to twenty four percent bracket right after

this point at three twenty one by M I go all the way up to thirty two percent I

do not want to be over there you'll miss the sweet spot so focus find it it's

right here right in front of you this is where I want to be in converting no more

IRA money that would put me over three hundred and twenty one thousand dollars

alright so that was fun hopefully had a few laps in that too

we're not gonna go there but here's the point we want to make sure that we're

having a planning meeting with our accountant before December 31st that's

right you got to do this before your end and choose how much you're going to

convert the old rule was you could undo some conversions before April 15th not

anymore we got some nice brackets under this GOP

bill where we're down to 37% into fewer brackets that's cool but I want to make

sure I'm careful and I'm making that decision before December 31st and pull

the trigger so that's what it's all about

on this Roth converting and I think you're gonna love it

this has really really been helpful for a lot of my clients so get out there

keep building wealth keep living the American dream and keep investing into

that Roth IRA it'll be worth million dollars more before you know thanks so

much for watching that video and I want to be your source for tax and legal

strategies it's hard enough to live the American dream without being out on the

web on Google trying to find answers to complex questions and just click in a

mouse hoping you got it right my team and I want to be a huge resource

treatment the law firm accounting firm by education resources on my site please

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