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Tax Planning for Retirement Accounts Under $1 Million · How to Retire on Time

• 0:00
  Mike: Hey, thanks for joining. Here's a question I was recently asked on my show, How to Retire On Time. Take a look.
• 0:11
  David: Okay. So here's one that was submitted. Can you talk about how tax planning is done for someone with less than $1,000,000 saved for retirement?
• 0:22
  Mike: Typically, if you've got less money saved in retirement, you do wanna do some IRA to conversions at the beginning very slowly, just a little bit here or there, and that's more for like long term planning or end of life experiences, or hedging a little bit against higher tax brackets, but not a lot. Just a little bit. It's very subtle. That way, then you can slowly drain your assets from your IRA very deliberately for the rest of your life, and you're taking the standard deduction benefits. You're taking the 12% today, maybe 15% later.
• 0:55
  As a general rule, there's a silver lining of a little bit of a conversion, but very deliberate, and then just slow and steady. That keeps more money in your portfolio, and that gives you more money over the rest of your life. But even then, that's an oversimplified answer because there's other factors that would influence how that planning is done. And this is why that planning process is so important. It's to answer questions like this.
• 1:21
  I've got a plan I did, the last plan I did last night, we're just converting all of his IRA Roth in two years. Doesn't have a lot of his IRA. Has a reasonable amount of his Roth, but lives off of a pension, is happy as a clam. Yeah. Has a good amount in brokerage funds.
• 1:37
  That's just how he saved. So we're just gonna knock that out, be done in two years, and then we've optimized the brokerage fund not to be actively traded creating tax issues, but really long term and beautiful. So he might trade every three to five years. That's beautiful. The problem with that is you don't need a financial advisor to place a trade every three years.
• 2:03
  Why would you play 1% on that? So these are the conflicts of interest on how fees are done, and the plan typically solves them. And the plan should be able to replace an adviser, including us.
• 2:14
  David: Yeah. Isn't that wild?
• 2:15
  Mike: It's a funny thing to say. Yeah. But if we're fiduciaries, we're supposed to be honest. Right?
• 2:20
  David: You got it.
• 2:21
  Mike: That's all the time we've got for today's show. If you enjoyed the show, thanks for tuning the podcast. Don't forget to subscribe, leave a rating.