The Cash Flow Clock: For Retirees - Book - Page 71
The Cash Flow Clock
to and/or convert to Roth accounts and stay in the
12% bracket, they should probably do it before they
end up in the 15%, 25% or even higher tax brackets.
If their income is higher, it may be worthwhile to
max out the 24% tax bracket before they end up
paying taxes at over 30%. Those Roth assets can
grow tax free for 60, 80, perhaps even 100 years.
We have recommended Roth conversions for recent
retirees. If their taxable income is less once they
have stopped working, we want to take full advantage
of the lower tax rates while we can.
We have even recommended Roth conversions for
those in their 80’s and 90’s, typically our clients’
parents or other family members. If they have tax
deferred assets that will pass to our clients, then it
may be worthwhile for them to pay the taxes now (or
have their beneficiaries pay the taxes now) so that the
taxes won’t have to be paid at higher rates after they
pass.
Some may not care if their beneficiaries have to pay
taxes. While that is understandable, they may be
missing something more important. If we have an
estate that will be left to our family members, they
will likely use the assets in the estate to pay those
taxes. They will not be using their money to do so.
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