Roth Conversion Decisions for 2023

By Chris Duderstadt

August 21, 2023

Roth Conversion Decisions for 2023

Key Points – Roth Conversion Decisions for 2023

  • Reviewing a Roth Conversion Case Study
  • What Different Roth Conversion Decisions Mean for Future Tax Rates
  • Why Reviewing for Roth Conversion Opportunities Is So Crucial
  • 2 Minutes to Read | 21 Minutes to Watch

What Goes into Roth Conversion Decisions

If there’s someone who loves to talk to people about Roth conversion decisions, it’s Bud Kasper. Bud is a converted Roth-aholic and has even made T-shirts to declare it. Bud’s son, Matt Kasper, echoes his dad’s enthusiasm about Roth conversions. But rather than list all the reasons to do Roth conversions, Roth IRAs, Roth 401(k)s—all things Roth—Matt reviewed Roth conversion decisions for 2023 in a case study on the Modern Wealth Management Educational Series.

We support a lot of clients who have been very disciplined savers. They’ve done a terrific job of building their wealth to support their families, but they have a big partner inside of their wealth. That partner is Uncle Sam. The big thing with Roth conversions is that we’re looking at specific calendar years to remove or reduce Uncle Sam from participating in your retirement.

In this case study, Matt looks into why someone who just recently retired would leverage a Roth conversion for 2023. They had about $100,000 in wages in 2022, so 2023 has been the first calendar year of making this huge transition. They’re moving away from wages and now are relying on their resources. Is now a good time for them to potentially leverage a Roth conversion?

It All Starts with a Financial Plan

Rather than outlining all the number-crunching that goes into Matt’s Roth conversion decisions case study in an article, we truly believe you’ll get much more out of it by watching him walk through it. It’s important to note that before Matt and Suzanne Bartling, CPA, designed this Roth conversion decision case study, he built out a financial plan for the sample client in the case study.

That financial plan allowed Matt to understand all the sample client’s resources—Social Security, pensions, investments, cash accounts, etc. Then, he had to go in and look at the long-term cash flow of the plan. When he was looking at the cash flow of the plan, he was looking at current and projected tax rates. When we look down the road and need to do things like Required Minimum Distributions, there’s a big headwind of taxation that you can get hit by. What can you do now to mitigate future taxes in retirement?

Again, all your financial decisions go back to your financial plan. So, if you don’t have a plan, that’s where you need to start. If you have questions about how to build your financial plan or specifically about Roth conversion decisions, we’re here to help. You have the option between scheduling a 20-minute “ask anything” session or complimentary consultation with one of our CFP® Professionals.

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Thanks for Tuning into Our Educational Series

You can meet with us in person, virtually, or by phone depending on what works best for you. We also want to thank you for your time and for tuning into the Modern Wealth Management Educational Series. We hope you have a wonderful rest of your day.

Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management, LLC, an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management, LLC does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.