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One Last Thing Before The End Of The Year

By Steve Gaito

McDowell County


As we wrap up 2019, there is one tax-saving strategy to implement. I am talking about a ROTH IRA conversion. Back in 2018 the Trump tax plan significantly reduced individual tax brackets. This is good news for those that have retirement plans like IRA’s, 401(k), 403(b) and 457 plans. For them as well as most workers they would have a limited time to pay less taxes on these income sources. The bad news is that these low tax brackets sunset in 2025 and return to the 2017 levels, if nothing is done. This sunset provides a unique opportunity for anyone with a qualified retirement plan. Properly structured you can convert these plans to a ROTH IRA and insulate these accounts from future tax increases. Because of the current tax brackets and the sunset, you can spread out the taxes on these plans over the next 5 years and pay less taxes over the long haul. I often get the question of why should I pay taxes now instead of delaying as long as possible. The answer is simple math. This is the very reason you should consider this. I believe that taxes will be higher in the future and if the “Secure Act” is passed your estate would pay considerably more. Let me show you how this works:

Bill has an IRA worth $250,000 and a 4% withdrawal per year and is in the 25% tax bracket state and federal. If he converts the $250,000 over 5 years that is $50,000 per year and he stays in the same tax bracket. He would pay $12,500 in taxes each year or $37,500 in taxes and have $212,500 in a ROTH IRA. Now if Bill takes the 4% from either of the accounts it would be like this.

Keep as IRA $250,000 *.04 = $10,000 – $2,500(taxes) = $7500 after taxes

Roth IRA $212,500 *.04= $8,500 tax free

The other question is since there is more money in the existing IRA it will grow larger. Let’s see what happens in 10 years:

Keep IRA grows at 6% per year would be $454,849 *.04=$18,194-$4,549=$13,645 after taxes

ROTH IRA grows at 6% per year would be $386,622*.04=$15,465 tax-free.

So, you can see that you will have more income while still just withdrawing 4%. Now if taxes increase, which I believe will happen, you will have already paid your tax obligation and now have reduced the taxes you would have paid over your lifetime.

There are many things to consider when converting IRA’s to ROTH IRA’s and therefore I provide analysis to see what impact this will have on your current tax situation as well as your lifetime tax obligation. My goal is to help you pay the least amount of income taxes over your lifetime and even your estate. There are also other options to a ROTH IRA which I can review and see if they are appropriate for you and your unique situation.

The bottom line is now is the perfect time to consider converting your qualified retirement plans to a tax-free option. If you mention this article, I will waive the fee for analysis through the month of December.

Finally, as December is the month, we celebrate the birth of my Lord and Savior, Jesus Christ, I encourage everyone to share the love, grace, and peace that only Jesus can bring. I wish you the best this Christmas and the coming year.

Merry Christmas



Steve is owner of Faith Based Health Care and Retirement Resource Management. He is a National Speaker on the topic of Social Security optimization, quoted in national publications like Money Magazine, US News and World Reports and Fox Business. Steve loves to educate and teach on financial topics like taxation of retirement accounts, long term care, healthcare, and efficient savings plans for small businesses. He has provided financial planning for missionaries through the International Mission Board. You can find Steve at 68 South Main St. in Marion, NC by calling 828-559-0299, email or visit his website at