Jill on Money with Jill Schlesinger

Episode: Roth Conversion Strategy
Date: December 19, 2025
Host: Jill Schlesinger, CFP®
Producer/Co-host: Mark Tularcio
Featured Listener: Rich from Montana

Episode Overview

In this episode, Jill Schlesinger dives into the nuts and bolts of Roth conversion strategy, taking a listener call from Rich, a retired Montana resident considering the best way to convert his traditional IRA assets to Roth IRAs. The conversation covers tax implications, withdrawal strategies, and the practical steps for optimizing conversions—not just for personal benefit, but also for legacy planning. Jill and Mark provide actionable advice, dispel industry misconceptions, and challenge some typical financial advisor recommendations.

Key Discussion Points & Insights

1. Listener Profile and Financial Snapshot

• Rich is 66 (turning 67), retired, with a wife aged 70, also retired.
• Current income sources: Wife's Social Security ($26k/year), Rich’s pension ($43k/year). Rich has not yet claimed his Social Security.
• Assets:
  • Traditional IRA: ~$1 million
  • Brokerage account: ~$900,000
  • Roth IRA: Rich ~$320k, Wife ~$240k
  • Home: worth ~$600k (no mortgage)
  • Net worth: ~$2.5 million
• Annual spending: ~$72,000
• Upcoming cash need: $35,000 for daughter's wedding

2. The Roth Conversion Dilemma

Legacy Motivation

Rich wants to maximize what he leaves to his kids and is considering Roth conversions as part of his legacy/estate planning.

• “...it seems like it would be a good vehicle for me to pass on money to my kids in a tax deferred manner for them.” - Rich (04:45)

Strategy Considerations

Jill breaks the issue into two main approaches:

• Begin Social Security now to help cover taxes on the Roth conversion

• Delay Social Security, using brokerage funds for taxes, to keep taxable income (and thus tax bracket) lower while converting

• “I might look at it as...do some of the converting over the next few years before you claim Social Security so that we can keep you in a tax bracket that is maybe a little bit more reasonable.” – Jill (10:39)

Tax Brackets & Timing

• Current income with just pension and wife's SS: $69,000 – falls in 22% federal bracket.
• Proposed annual Roth conversions: $100,000–$150,000/year, possibly up to $125,000, to stay in 22% or lower part of 24% bracket.

Funding the Tax Bill

• Preferred: Use the brokerage account (capital gains taxed at 15%) rather than ordinary income like Social Security.

• Avoid: Using Social Security benefits directly for Roth conversion taxes.

  • “I don't think I would use the Social Security income to pay the taxes on the [conversion]. I would rather use the brokerage and pay capital gains to do it.” – Mark (13:13)

FYI: Montana State Tax

• About 6%, according to Rich.

3. Professional Pushback & Financial Industry Missteps

Advisors' Recommendations

• Rich's financial planner was more interested in selling life insurance than supporting the Roth conversion.

• Both planner and accountant were skeptical of aggressive Roth conversion.

• “Our financial planner was trying to entice me into life insurance.” – Rich (15:46)

• “Oh, no. What kind of financial planner? I want to fire that dude.” – Jill (16:03)

• "What he'd rather do is make sure you have the brokerage account intact so they can charge you a fee on it..." – Jill (16:18)

Jill’s Counterview

• Focus should be on the optimal tax outcome and client goals, not on selling products.
• Roth conversions make sense for Rich’s legacy goals, especially given enough liquidity to pay taxes now.

4. The Concrete Game Plan

• Delay Rich’s Social Security. Use the brokerage account to help pay for annual living expenses and Roth conversion taxes.

• Convert $100k–$125k per year from the traditional IRA to Roth IRA for the next few years before Social Security starts.

• Target ending up with ~$500k–$600k left in the traditional IRA, shifting remainder to Roth.

  • “I wouldn't go crazy, honestly. Like, if you got the traditional assets down to, I don't know, let's call it five or six hundred grand...” – Jill (14:52)

• Revisit conversion amounts annually with accountant to maximize within the most favorable tax bracket.

Capital Gains Strategy

• Selling from brokerage account triggers 15% capital gains tax—potentially much less than ordinary income tax brackets for conversions, and thus a preferable source for conversion funding.

  • “You pay a 15% capital gains rate rather than say 22 or 24% as a marginal tax bracket. That's all. It's like a tax arbitrage.” – Jill (19:05)

Keep Accountants in the Loop

• Make the plan clear with tax professionals; ensure everything aligns with tax code and bracket management.

5. Listener FAQs & Real-World Math

• Why not claim Social Security now?
  • Deferring Social Security keeps ordinary taxable income lower, leaving more ‘space’ in the bracket for Roth conversions.

6. Considerations for the Future

• Monitor tax law changes for Roth conversions and Social Security taxation.
• Be ready to adjust the conversion amount if market returns or spending needs change.

Notable Quotes & Memorable Moments

• (13:13) Mark: “I don't think I would use the Social Security income to pay the taxes on the [conversion]. I would rather use the brokerage and pay capital gains to do it.”
• (16:03) Jill (about insurance): “Oh, no. What kind of financial planner? I want to fire that dude. Sorry.”
• (16:18) Jill: “What he'd rather do is make sure you have the brokerage account intact so they can charge you a fee on it... Like life insurance. That's a terrible…that makes no sense to me.”
• (19:05) Jill: “You pay a 15% capital gains rate rather than say 22 or 24% as a marginal tax bracket. That's all. It's like a tax arbitrage.”
• (14:52) Jill: “If you got the traditional assets down to, I don't know, let's call it five or six hundred grand, I think it's pretty reasonable at that point.”

Important Segment Timestamps

• Listener call begins: 04:42
• Asset overview: 05:58–08:24
• Annual spending & upcoming obligations: 08:29–09:39
• Conversion strategy breakdown: 10:06–15:17
• Advisor and industry product pushback: 15:39–16:46
• Game plan recap: 17:53–20:00

Takeaways & Action Steps

• Evaluate Roth conversions with an eye on future tax brackets and estate planning goals.
• Pay conversion taxes from taxable accounts to optimize the after-tax outcome.
• Beware of product-centric financial advisor recommendations; focus on strategies that support your long-term goals.
• Work closely with a tax professional to tailor conversions to your precise income and tax situation each year.

For more listener questions and deep-dives into practical money strategy, visit jillonmoney.com.