Your Money, Your Wealth – Episode 563: "How to Beat the 'Fire Hydrant' of Future Taxes: YMYW Best of 2025"

Date: January 6, 2026
Hosts: Joe Anderson, CFP® & Alan "Big Al" Clopine, CPA
Guests/Special Contributors: Ed Slott, CPA (Roth IRA specialist), Susan Brandeis, CFP

Episode Overview

In this "Best of 2025" episode, Joe and Big Al revisit the most popular topics, listener questions, and expert insights from the past year, focusing on Roth conversions, the impacts of future tax increases, optimizing capital gains, maximizing retirement security, and specific planning challenges. Special guest Ed Slott, CPA, known as the "Roth IRA Guru," joins to explain the enduring power of Roth accounts and address concerns about legislative risk. The hosts also respond to listener scenarios, including when NOT to do Roth conversions, how to balance Roth conversions and tax-efficient capital gains strategies, how much is "enough" for retirement, and Social Security-pension coordination.

Throughout, the show maintains its signature mix of expert spitballing, relatable analogies, and humor, providing practical guidance for listeners at all wealth levels.

Key Segment Summaries & Discussion Points

1. The Power and Strategy of Roth IRAs (w/ Ed Slott)

Timestamps: 00:52–19:36

Why Roth IRAs Are "The Greatest Account Ever"

• Ed Slott: "The Roth IRA is a miracle. It’s the greatest account ever created... everything in there grows income tax free for the rest of your life. And even under the new rules under the Secure Act, 10 years beyond to your beneficiaries." [01:35–01:53]
• Key benefit: Withdrawals are tax-free during life and for heirs (with new 10-year window).

The Only Downsides: Paying Taxes to Convert

• Ed Slott: "The only question is how much are you willing to pay to get it?" [02:13]
• No limits on conversion amounts, only your "pain threshold" for taxes in one year.

Strategic Roth Conversion Timing – Bracket Management

• Ed Slott: "Always pay taxes at the lowest rates. If you can always get your money out at the lowest rate, you’ll always end up with more." [03:44–04:01]
• Current rates are historically low – use these years as an "opportunity window" before possible sunsets or increases.

Government Policy & Roth IRA "Legislative Risk"

• Many fret that Roth IRAs "will be taxed later" (like Social Security was). Ed’s humorous (but pointed) response:
  • "You can’t trust the government as far as you can throw them. ...Tax laws are written in pencil and they change." [06:31]
  • However: "Congress are the worst financial planners on earth. ...They love, love, love, addicted to love, Roth IRAs. Why? Because they’re so short-sighted, they only look at the money that comes in up front.” [07:05–07:30]
  • If Congress ever changed the Roth taxability, they'd "kill the golden goose" that brings revenue in the short term, which is politically unlikely.

SECURE Act and the End of the Stretch IRA

• Ed Slott: "Whenever Congress names a tax law, you can almost always bet that whatever they name it, it will do exactly the opposite. So when I heard the SECURE act is coming, I said to myself, hold on to your wallets. And sure enough, it was a money grab." [12:11–13:05]
• Now, most beneficiaries have to empty IRAs within 10 years, meaning inherited IRAs are “a fire hydrant” of taxable income.

Alternatives & Trusts as Beneficiaries

• Trusts used to be good IRA beneficiaries for control, but now: "IRAs are now a horrible asset, a disaster to leave to a trust. Trust tax rates are the highest in the land." [16:23–16:35]
• Better: Convert IRA to Roth, then leave Roth to a trust, bypassing trust tax complexity and maintaining post-death control.

2. Listener Questions: Roths, Software & Capital Gains Tax (Q&A)

Timestamps: 20:46–41:51

Is There a Point Where Roth Conversions Stop Making Sense?

• Jerry from Phoenix: Planning large Roth conversions, but financial planning software (Bolden/New Retirement) says to stop (21:07–23:18).
  • Software can't forecast future tax rates/brackets for heirs.
• Joe & Big Al’s Response:
  • Beware of "snapshot in time" assumptions – "take a look at this stuff every single year." [25:08]
  • Conversions depend on current and future brackets, income sources, life expectancy, and heirs' likely brackets.
  • Joe: “Each year the market’s down 20%... I’m doing a conversion.” [28:40]
  • Big Al: If you don't have cash to pay conversion tax, or if you’re in a very high bracket (“into the 32% tax bracket”), conversion may not make sense. [28:35–28:40]

Multiple Reasons NOT to Do Roth Conversions

• Triggers higher tax on Social Security (provisional income effect)
• IRMAA surcharge on Medicare Part B/D
• Loss of credits and deductions (education, passive losses, rental losses)
• Net Investment Income Tax surprises when combining stock sales and conversions
• Memorable Moment: "You’re starting to reel off all the reasons that somebody should not do a Roth conversion. Because, dang it, that’s what you’re known for, is the Roths." [31:56]

Capital Gains Harvesting vs. Roth Conversions – Which to Prioritize?

"Skipper & Ginger" Scenario [34:25–41:51]

• Situation: Limited years in 12% bracket, can realize ~$70K capital gains at 0% federal tax or convert to Roth (filling room in same bracket results in effective 27% blend rate).
• Big Al: "Pick one or the other in any given year... If you want to diversify and sell, fill up the 12% bracket at 0% cap gains and higher, then switch back to conversions once you're allocated properly." [39:54]
• Key insight: Don’t let love of 0% rate distract from longer-term risks ("tripping over dollars to pick up pennies"): large IRAs can create much higher forced ordinary income later.
• Joe: "The worst thing that happens with very good savers is that they’re forced to pay tax on income they don’t need. And those RMDs are just forcing this out..." [41:34]
• Conclusion: Prioritize getting IRA money into Roths unless you have major gains/diversification needs in the taxable.

3. How Much Is Enough? Case Study: "Mr. Buckeye" Dreams of Early Retirement

Timestamps: 43:06–54:11

Mr. Buckeye (42) and wife (41): Diligent savers, moderate earners, $800k already saved, want to retire at 55, spending targets ~$60k (today’s dollars), aiming to bridge income gap before Social Security.

• Al's Math (48:34): Maintain $60k/yr savings + 7% return => ~$3.1 million by 55; 3% withdrawal can fund inflation-adjusted $90k; on paper, it works, but it's "a little more tight than I would like at 55. I would probably have a part time job to sort of cover some potential gap." [51:15]
• Joe: Worst-case viewpoint—if forced to pull a third of the portfolio before Social Security, would pause and consider a side gig for margin of safety.
• Asset allocation advice: 90/10 split fine while young; reduce stock allocation closer to retirement date or if fully retiring without earned income safety net.

4. Social Security, Pensions, and Post-WEP Law Changes

Timestamps: 55:12–59:53

Sherilyn’s Spousal Benefit Dilemma (and WEP Update)

• Husband: Retired from city (no Social Security), subject to Windfall Elimination Provision (WEP). After law update, received retroactive Social Security payment.
• Susan Brandeis, CFP: Yes, spousal benefit is based on 50% of the benefit at the other spouse's full retirement age, indexed for inflation.
  • If underpaid due to WEP, should have gotten a retroactive check and adjusted benefit going forward.
  • Big Al: "If you didn't get a benefit or a check and you think you should have, that's when you gotta call Social Security... you just have to do it, right? To get your higher benefit.” [58:51]
• Message: New rules may impact many public-sector retirees – worth checking your situation.

Notable Quotes & Memorable Moments

• Ed Slott, on Congressional short-term thinking and Roths:
  • "Congress are the worst financial planners on earth. ...They secretly ...love, love, love, addicted to love, Roth IRAs. Why? Because the only money that can get into a Roth is already taxed money." [07:05–07:30]
• Ed Slott, on the Secure Act:
  • "Whenever Congress names a tax law, you can almost bet that whatever they name it, it will do exactly the opposite.” [12:11]
• Joe, on financial planning software:
  • “You have to take a look at this stuff every single year. ...I can guarantee you this, Jerry. Everything else that you see in the future is wrong." [25:08]
• Big Al, on asset allocation inside a Roth:
  • “Why wouldn’t you want your stuff—gas on there, right?” [29:47]
• Joe, on Roth conversions:
  • “If you don’t have the cash to pay the tax, don’t do it.” [30:17]
• Joe, on listeners sticking with the show:
  • “I don’t think there’s anyone that’s listening to the show for more than five years. ...I think they get totally burnt out listening to this garbage for like six months.” [54:18]

Episode Structure & Recommended Listening Timestamps

• 00:00–00:52 — Episode introduction & context
• 00:52–19:36 — Ed Slott on Roth IRAs, legislative risk, SECURE Act
• 20:46–32:13 — Q&A: Roth conversion limits, pitfalls, analysis software limitations
• 32:13–41:51 — Capital gains harvesting vs. Roth conversions, detailed scenario
• 43:06–54:11 — "Mr. Buckeye": Early retirement, how much is enough? Asset allocation
• 55:12–59:53 — Social Security, WEP law update, spousal benefits (with guest Susan Brandeis)
• Advertisements and non-content sections omitted.

Final Thoughts

This "Best of" episode distills down the most actionable themes from a year of listener engagement:

• The enduring (and underappreciated) advantages of Roth IRAs, particularly before likely future tax hikes.
• The necessity to annually re-evaluate conversion plans, especially using both intuition and tax modeling, not just software.
• Making strategic choices between realizing gains at low/no capital gains rates and accelerating Roth conversions to beat future "fire hydrant" tax shocks.
• The importance of flexibility, sound risk management, and, above all, big-picture thinking when it comes to lifetime tax reduction and estate planning—with humor and practical wisdom along the way.

For more resources or to submit your own question for a future episode, visit YourMoneyYourWealth.com.