Today, we’re taking you on a deep dive into one of the most effective tax planning strategies out there: the Roth IRA conversion. 

Follow along as financial planning expert James Pommert explores a real-world scenario featuring Steven and Jane Smith, a couple of retired doctors who (like many others) are facing the reality of required minimum distributions (RMDs) once they hit their retirement years. 

As a quick refresh, an RMD is the amount the IRS requires you to take out of your tax-deferred accounts (such as traditional IRAs and 401(k)s) starting at age 73.

But what if there was a way to minimize the tax burden that comes with these mandatory withdrawals and even increase their wealth over time?

A Roth IRA Conversion Strategy for Physicians

Using tax planning software, James shows us how changing the investment strategy for the Smith’s Roth assets resulted in significant growth – potentially giving them nearly $1 million more in their Roth accounts by age 90.

Related: 5 Tax Planning Strategies for Early-Career Physicians

Plus, this strategy can help your younger family members, too. A Roth IRA conversion strategy can result in a larger inheritance and, in some cases, reduce the tax burden on heirs, since Roth assets are typically tax-free for beneficiaries.

This isn’t just about numbers on a page – this strategy could make a real difference in your financial future. We make these complex concepts easy to understand and provide helpful visuals, so you can see how a little strategic planning now can pay off in big ways later. 

Even if you’re still years away from retirement, the insights from this video are invaluable for anyone looking to optimize their wealth. Click here to schedule a complimentary, no-pressure consultation or explore our library of other resources for early-career physicians.

Chapters

• 00:00:00 - Introduction to Roth Conversion Strategy with the case study of Steven and Jane Smith.
• 00:00:30 - What are Required Minimum Distributions (RMDs) and how do they impact your long-term planning?
• 00:04:03 - How do different strategies impact your taxes, both now and later in life?
• 00:05:16 - Risk tolerance can influence which route is most beneficial for you. 
• 00:08:23 - A Roth IRA conversion can allow you to leave more to your beneficiaries through tax savings.
• 00:09:43 - Age matters when planning your Roth IRA conversion strategy.

3 Key Takeaways

1. Starting at age 73, individuals are required to take required minimum distributions (RMDs) from their pre-tax retirement accounts.
2. Although paying taxes earlier reduces assets in the short term, the strategy can potentially lead to greater asset growth in the long run.
3. A Roth conversion can also reduce the taxable amount that beneficiaries inherit, allowing them to receive more tax-free money.

What Does Your Long-Term Strategy Look Like?

We can help you plan for several potential outcomes and find a strategy that fits into your “now” and “later.” Click here to schedule a meeting with a member of the Equitta team. 

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