Podcast Summary: "Is Your Roth Conversion Timing All Wrong? (Financial Blunders)"
Podcast: Your Money, Your Wealth
Hosts: Joe Anderson, CFP® & Alan (“Big Al”) Clopine, CPA
Episode: 550
Release Date: October 7, 2025
Overview
In this episode, Joe and Big Al dive deep into Roth conversion timing—one of the most commonly misunderstood aspects of personal finance and retirement planning. Through listener questions and real-world “spitball” analysis, they break down not just the mechanics but the strategic thinking behind Roth conversions and tax-minimization, with their trademark humor and spontaneity. Featured topics include Roth conversion timing for different life stages, balancing tax-deferred and Roth accounts, dealing with RMDs, the “age plus 20” contribution rule, and transitioning into a financial planning career.
Key Discussion Points & Insights
1. Roth Conversion Timing: When And How Much?
Barry’s Roth Conversion Dilemma ([00:55]–[07:07])
- Profile: 62, single, retiring at 63, converting $20k/year of pre-tax to Roth; good pension, significant Roth and traditional savings, plans increased post-retirement spending.
- Questions: Should Barry continue conversions through retirement? Increase the amount? Is her timing optimal?
- Analysis:
- Current Plan is Solid: Converting $20k/year up to the 24% tax bracket is reasonable given her income structure. Running close to the top of the 24% bracket likely makes sense for her, considering future RMDs.
- Post-Retirement Conversions: Both Joe and Al recommend continuing (and possibly increasing) Roth conversions in the early years post-retirement (2027-2031), aiming to stay in the 22% bracket where possible, as RMDs and other income will later push her bracket higher.
- State Tax Considerations: NY exempts the first $20k of IRA distributions; unclear if this applies to conversions, but they recommend optimizing around this rule when possible.
- Quote:
"I like the idea of continuing conversions after retirement because...RMD income with [her] other income is going to push [her] past the IRMAA limits." — Big Al [05:47]
2. Sequence Planning for High Earners & Couples
Jerry & Elaine: Retire in Six Years and Leave an Inheritance? ([07:17]–[16:21])
- Profile: Couple, mid-50s, $2M+ in retirement, high earners, planning substantial savings for six more years before retirement at 62; goal is to spend $120k/year and leave money to kids.
- Questions: Can they retire at 62 and still leave an inheritance? When should Roth conversions start?
- Analysis:
- Retirement Feasibility: Their trajectory is “amazing”—with projected $3.7M+ at retirement and reasonable withdrawal rates.
- Roth Conversion Urgency: With most wealth in deferred accounts, RMDs could balloon, pushing them into higher brackets later. Conversions in 22-24% brackets now (especially when one spouse retires and income drops) are prudent.
- Tax Rate Uncertainty: While tax rules may change, it's generally better to take some tax rate uncertainty off the table and utilize Roth’s long-term benefits.
- Quote:
"I'm willing to take that bet all day, every day, just to take the uncertainty off the table." — Joe [16:15]
3. Young Professionals & Roth Strategy
Alex (31, Software Engineer) – Should I Convert My IRA All At Once? ([17:05]–[21:32])
- Profile: $150k salary, $250k in retirement accounts, wants a 50/50 Roth/pre-tax split, considering converting $57k IRA to Roth.
- Question: Convert all now, or shift gradually? And how to pivot into financial planning as a career?
- Analysis:
- Financial Feasibility: Technically converting now in the 24% bracket is mathematically sound, especially since future income/tax rates likely to rise with career advances, but the real-world challenge is the $20k tax bill.
- Practical Approach: Joe advocates for a gradual, less painful conversion, especially at 31; that $20k is “a lot of rounds of golf” and reducing liquidity for lifestyle.
- Rule of Thumb: Don't get fixated on a 50/50 ratio without projections—model the endpoint to decide.
- Quote:
"Put your money where your mouth is, Alex!" — Big Al [21:22]
4. Careers in Financial Planning
Alex’s Second Question: How to become a fiduciary advisor? ([21:32]–[29:04])
- Advice:
- Start with CFP coursework and certification—the industry’s “gold standard.”
- Explore fee-only RIAs (Registered Investment Advisors) for fiduciary, product-neutral advice. Avoid sales-driven or “insurance-first” shops.
- Networking—talk to planners, ask about firm culture/training; seek informational interviews, especially at NAPFA-member firms.
- Path is often paraplanner/client service associate → CFP → client-facing advisor.
- Ethics are non-negotiable; culture fit is vital for long-term satisfaction.
- Quote:
“Everyone looks the part...and then all of a sudden, you’ve got sales quotas. There’s no help to actually help [clients]—and you’re not getting paid all that much...The industry is still like that in a lot of places.” — Joe [22:58]
5. Paying Taxes on Roth Conversions/Withdrawals
Mike from Philly – Use Conversion Funds to Pay Taxes? ([29:04]–[35:46])
- Profile: 58, $2.6M in tax-deferred, $750k tax-free, $850k brokerage, plans to retire soon, concerned about future tax hikes.
- Questions: Should you ever pay conversion taxes from the IRA/401(k) itself? Should you withdraw early to blunt future taxes?
- Analysis:
- Using IRA to pay conversion taxes: “Rarely, but not never.” Only in cases of massive IRAs and no other liquid assets. If possible, use outside funds—paying taxes from IRA is effectively “paying tax to pay the tax.”
- Blunting Future Taxes: Drawing down (via spending or conversion) before RMDs is a sound tax-evening strategy; 2.6M could double or more before RMDs kick in.
- Debt for Conversion: Joe would rather take a home equity loan than pay taxes from the IRA (with moderation/warning).
- Quote:
“You’re paying tax to pay the tax to pay the tax. No!” — Joe [35:09]
6. Roth Distribution Rules & The 5-Year Rule
Lisa (Nebraska): Roth Withdrawals Confusion ([36:49]–[40:05])
- Question: Are there taxes if I withdraw from a Roth that’s had conversions in the past two years?
- Clarification: If you’re over 59.5, the five-year “conversion clock” is irrelevant. Original Roth/IRA has been open 20+ years—Lisa can withdraw tax-free.
- Quote:
“You're wrong. You're okay.” — Joe [39:06]
7. Contribution Rules for Passive Income & Roths
Lisa (San Diego): Rental Property Income & Roth 401(k)? ([45:34]–[46:54])
- Question: Can rental income qualify for Roth 401(k) contributions?
- Answer: No. Rental income is passive, not “earned income,” so it doesn’t count for IRA/401(k) eligibility.
8. Rules of Thumb: Critiquing “Age Plus 20”
Listener Correction and Hosts’ Response ([40:11]–[45:31])
- Background: Listener provides context for Scott Cederberg’s “age plus 20” rule—use your age + 20 to determine percentage for pre-tax 401(k) contributions.
- Hosts’ Take: Still not a fan. It ignores the individual’s actual tax brackets before and after retirement, and oversimplifies essential planning.
- Quote:
“Rule of 20. Still stupid.” — Joe [43:10]
Notable Quotes
-
Big Al on Roth Conversions and IRMAA:
“I like the idea of continuing conversions after retirement because...the RMD with other income is going to push her past IRMAA.” [05:47]
-
Joe on Conversion Risk:
“There's a percentage that you're making a wrong move by doing a Roth conversion. But I'm willing to take that bet all day, every day, just to take the uncertainty off the table.” [16:15]
-
Big Al to Aspiring Planners:
“Put your money where your mouth is, Alex!” [21:22]
-
Joe on Paying Taxes from IRA:
“You’re paying tax to pay the tax to pay the tax. No!” [35:09]
-
Joe, blunt (but correct) reassurance:
“You're wrong. You're okay.” (To Lisa about Roth withdrawal taxation) [39:06]
-
Joe on Simplistic Rules:
“Rule of 20. Still stupid.” [43:10]
Additional Listener Mail & Fun Moments
- Hosts banter over Seinfeld, the lack of violence in sitcoms vs. today’s shows, and the “red/green money” sales pitch.
- Multiple listeners describe their preferred drinks (sangria, vodka tonic, bourbon) and cars (Honda Civic, Toyota Sienna, Subaru Forester) in humorous introductions, a recurring tradition on YMYW.
- Playful jabs at each other’s reading abilities and the importance of spell-check (e.g., “hire able/hireable”).
- Hosts rib each other over listener emails: “I’d rather be called Joel than team.” [37:08]
Timestamps for Major Segments
- Barry's Roth strategy: [00:55]–[07:07]
- Jerry & Elaine’s retirement and Roth timing: [07:17]–[16:21]
- Alex’s Roth conversion and career switch: [17:05]–[29:04]
- Mike in Philly on using IRA funds to pay conversion taxes: [29:04]–[35:46]
- Lisa’s Roth withdrawal five-year rule: [36:49]–[40:05]
- Listener correction on age-plus-20 rule: [40:11]–[45:31]
- Lisa (San Diego) on passive rental income and Roth 401(k): [45:34]–[46:54]
- General closing banter: [46:54]–[47:24]
Final Thoughts
Joe and Big Al reiterate that personal finance is best navigated with custom analysis, careful tax planning, and skepticism toward blanket rules-of-thumb. The episode’s listener questions showcase real-world complexity, underscoring the need for thoughtful, individualized strategies—along with a sense of humor.
For those confused by Roth rules or charting a career in finance, the episode provides both technical answers and insider advice in an engaging and approachable format.
Episode Resource Links
End of Summary