How to pay Less Taxes on Roth Conversions?

[Midpack]

I assume this is in the category of too good to be true, and the author doesn’t share any substance to how it’s done, just closes with contact us for more info (surprise, surprise).

It’s an example of a couple with $5M NW, $3M in TIRAs. I’d they convert it all over 5 years they pay $1.7M in taxes. But the author says they can convert it all in 5 years and pay $400K in taxes.

Since I’m doing Roth conversions now, anyone know what the angle is? Again, I’m assuming it’s too good to be true, or a special case that applies to almost no one else.

https://youtu.be/RYfvYtE69JQ

 

[RunningBum]

I don't have time to watch the video this morning, and probably won't since you say it has no details. If they are converting $3M over 5 years, they aren't going to be paying over 50% ($1.7M) in taxes. $600K/yr income on conversion with no other income is $150K/yr, or $750K in taxes. Still a long ways from $400K, but closer than your $1.7M. Maybe you typed some number incorrectly. Carrying over cap losses only reduces income by $3000/yr. Maybe they have some huge itemized deductions.

 

[braumeister]

It appears to be nothing but an ad for his advisory service. He even says it's not a real example, just "for illustration purposes only" and assumes huge growth on a 100% equity allocation. Clickbait.

 

[LOL!]

I think they are donating a lot to charity via QCD since the husband is age 71.

That reduces the traditional IRA holdings. The RMD of the husband pays for the taxes.

So although they pay less in income taxes, they "pay" a decent amount to charity instead.

The video needs another column in the spreadsheet: "Charitable contributions."

 

[Time2]

I went to his Youtube homepage and viewed his first video.
At some point he creates $584,000 of income adjustments, kinda out of thin air and also $310,000 of itemized deductions. He didn't have any of these in previous years. https://youtu.be/Jns5h2Ayv7Q?t=532
For the answer on how to setup these strategies and techniques just click on the button below and setup a meeting.
Seems like a 10 ft pole is in order here.

 

[misanman]

One of the videos mentions three somewhat vague tax tools:
1. Taking advantage of Jobs Act to get "bonus depreciation". Invest $100K and get $90K deduction right away. Investment paid back in 3-4 years via "profit sharing". I have no idea what this is.
2. Reduce AGI through charitable deduction (from non-qualified sources). $50K in nets $250K of deductions that can be used over the next 15 years.
3. Roth Conversion Tax tool - very vague description and I have no idea what this is.
He says you get the huge benefit by combining these three tools.

 

[finnski1]

It appears to be nothing but an ad for his advisory service. He even says it's not a real example, just "for illustration purposes only" and assumes huge growth on a 100% equity allocation. Clickbait.

Thanks for saving me the bother of viewing it. I'll move on to other fun topics.

 

[teejayevans]

1. Wait for the market to crash which is very likely in next 5 years.
2. Convert when the market reaches its low.
3. Pay taxes on this reduced amount.

 

[DawgMan]

1. Wait for the market to crash which is very likely in next 5 years.
2. Convert when the market reaches its low.
3. Pay taxes on this reduced amount.

Nothing like a strategy that gets you excited for a market crash!

 

[pb4uski]

One of the videos mentions three somewhat vague tax tools:
1. Taking advantage of Jobs Act to get "bonus depreciation". Invest $100K and get $90K deduction right away. Investment paid back in 3-4 years via "profit sharing". I have no idea what this is. ....

I was talking with a guy from our neighborhood who is with a firm that specializes in tax planning for HNW and UHNW people and we were chatting about Roth conversions. Some clients would put their tIRA money in some exotic investment (perhaps oil & gas related?) that was expected to dramaticallly decline in value in the early years and then recover greatly in the later years. They would convert after the decline in value, pay less in tax and then the subsequent run up in value would be tax free.

Make sense in principal but it sounded a little hokey to me... sort of like the tax shelter investment of decades past.... so I didn't pursue it... but that may be the play in the clickbait. I try to avoid investments that are signed to lose money.

 

[tenant13]

Nothing like a strategy that gets you excited for a market crash!

Ironically, this actually is something that works great and can sweeten the next upcoming crash. I knew I should have done it this year and given that my portfolio went up almost 100% since the dip in March (thanks to Apple and bitcoin) I was right. Not entirely useless lesson - we can expect another event like that in the future. But in March and April I barely had enough common sense not to panic - even that didn't work that well: I ended up with the heart attack .

 

[misanman]

Some clients would put their tIRA money in some exotic investment (perhaps oil & gas related?) that was expected to dramaticallly decline in value in the early years and then recover greatly in the later years.

I've been looking for that kind of investment. Does anyone have a pointer to something specific?

 

[braumeister]

1. Wait for the market to crash which is very likely in next 5 years.
2. Convert when the market reaches its low.
3. Pay taxes on this reduced amount.

I did that early last year. Had a stock in the TIRA that had really tanked and was worth only about a third of what I had paid for it. I still thought it was a good company though.
Converted it to the Roth at that low value and since then it has come roaring back. Now worth several times what I paid for it.

 

[Fermion]

Before they fixed the unconversion trick I always thought converting to a Roth and then making a risky investment (Gamestonk!) was a way to really move a bunch of money into a Roth cheaply.

That being said, I converted $5,000 of an IRA to a Roth four years ago and today that Roth is $68,000 through heavy investment.

 

[finnski1]

I did that early last year. Had a stock in the TIRA that had really tanked and was worth only about a third of what I had paid for it. I still thought it was a good company though.
Converted it to the Roth at that low value and since then it has come roaring back. Now worth several times what I paid for it.

Well played!