Hello, welcome. We’re going to get started in a moment. Um, if you can hear me, can you just respond yes for the the folks on the webinar so far? Uh, so I can know that the audio is working. Appreciate that. Okay, terrific. Got a got a response here. Audio working. Uh, great, great news. So, um, I’ll be back in a moment. We’ll get started. Okay, good afternoon. Uh, welcome everybody. Let’s get started. Uh, thank you so much for joining for our webinar. My name is Christian Chaplua. I’m a financial consultant here at Alliant Retirement and Investment Services. So, we work with members throughout the United States. Uh many of you have joined for multiple webinars. So, really appreciate you kind of checking back in. Um, you know, we we are thrilled to um offer financial planning, help clients reach their goals, talk about investments, uh whether you’re a line credit union member, you work with one of our company partners, um uh in general, we’re just thrilled that you’re here to kind of uh learn more about Roth conversions for today’s agenda and all the other information and webinars uh that we provide on a weekly basis. Just a quick introduction about myself. Uh so I’ve been in wealth management on the personal side uh for 15 years and uh previous to this I was a fixed income research analyst. Um so kind of bring all that experience uh to every client’s personal situation. Uh personal finance it’s very personal. Uh it’s more personal than it is financial in fact. So kind of understanding all the different uh subsets and subcategories of financial planning and uh investments. It’s so important for us to kind of succeed and reach our goals. I mean, the world is just more complicated and quicker than ever and we’re seeing the pace of technology uh just rapidly accelerate and the impact on financial markets and then you know ultimately our retirement accounts if we’re invested our 401ks, IAS and everything else. So, I think you made a great decision uh investing an hour today to learn about Roth conversions. Uh this is one of our most popular uh webinars. So we’ve got a you know huge RSVP list. Uh so yeah, please do uh consider this as an introductory uh webinar to the topic of Roth IRA conversions. It’s not meant to be kind of a do-it-yourself um you know workshop. it uh it’s really supposed to introduce you to the the concept and then if you’d like to learn more you’ll have an opportunity book a meeting with myself uh just uh kind of get into a one-toone discussion if that makes sense talk about financial planning and other ideas as well like I mentioned there’s a lot of information um so I’m going to be going through the slides quickly uh just want to mention this up front so this presentation intended for educational purpose only it’s proprietary We uh have a huge investment in these webinars to uh to get them to you, get the information to you in a kind of clear, concise manner. Um we kindly ask that attendees do not record, reproduce, distribute any part of this presentation, including video, audio, screen capture, AI based tools, etc. So really appreciate your cooperation on that. Two upcoming webinars, tax planning changes, that’s happening Thursday, June the 11th at 2 p.m. our regularly scheduled time. So, just talking about tax planning as it relates to retirement planning and your financial plan, not so much kind of your um you know your W2 and your uh you know 1099s, more about you know financial planning and um and how it relates around your investments investment account. So, if you’re interested in that, please do join us. Estate planning, uh super important topic, six steps to legacy planning. June 18th is when we’re going to be presenting that. So, um we encourage and and try to promote estate planning as much as possible um in just about every financial plan and through these webinars cuz uh you know it’s tough to um you know to pass on our our wealth and and everything else without a good plan. Um we don’t want to make it difficult for our beneficiaries. So um if you need to get your estate planning done, please do join us on Thursday the 18th. In addition to our webinars, we’ve got our Investsavvy podcast. Over 20 episodes available on our website, also through Apple and Google. And then we’ve got our Aerys website and blog. Lots of tools, templates, information, articles, plenty of resources for you get smarter about financial planning. So hopefully you be have a chance to uh log in. That’s the AIS website. Aerys is aligned retirement investment service.
Here’s how we can help you. So um a couple things to mention. uh financial planning. That’s kind of the the foundation of everything that we do here. So, a basic plan, foundational plan available to everybody. There’s no charge for that. Um I’m going to give you a couple invitations. Take me up on that and get a financial plan done. Uh please do get it done at some point in your life and and get it done now if uh this is the year that you want to get it done. It will help you with retirement planning, getting to all your goals in retirement, uh knowing how to maximize your um your nest egg for retirement, all the above. Uh advanced plan planning is also available. That’s available to clients. Um that includes Roth conversion analysis, tax planning, cash flows, cash management strategies, all the above. Um so the reason that we uh reserve that for clients is because it’s more time inensive the tools everything else that we’re using um kind of more sophisticated. So uh that’s for clients. Uh we really encourage and promote the idea of becoming a client that’s the best way to take advantage of all these strategies. So advanced plan if you’re interested in that do let me know respond yes when I launch the poll a little later on. Estate planning we have a digital estate planning service. Uh I’ll summarize that a little bit later. do you take advantage and then investment management so traditional portfolios um but you know lots of different strategies uh active passive strategies dividend portfolios and then income strategies like annuities and market CDs uh all of the above all available to you uh please do take advantage and and get in contact with me um to kind of learn more about these ideas and see if it can help you with your goals and your financial plan.
Okay, with that introduction, let’s talk about uh Roth conversion. So, uh a big part of our Roth conversion is uh taxes and you know the the future tax environment. We get lots of information about uh you know the national debt uh thinking about what tax rates might be in the future and uh lots of kind of uh legislative decisions through Congress. Um so it is uncertain. You know, we’ve got a lot to to manage in terms of information flow, budget deficits, entitlements, taxation, Roth IAS, all the above coming at us kind of quite quickly, especially in today’s kind of technology age. Um the national debt today is around $36 trillion. That’s around $100,000 for every single person in America. Uh so quite a big number. Uh something to consider. We’ll see how um the federal government manages that. Um and then also you know how the federal government’s going to be managing budget deficits in the future you know with all the different categories of spend uh in the budget. So defense entitlements Medicare uh etc. So this is a chart kind of going back you know back to 2015 so about 10 years just thinking about the federal deficit. Um they have been rising. We all know that you know the the yeartoday uh year-to-year fluctuation that’s one thing but just in general it’s adding to the national debt. So this is kind of a a concern for retirees, a big concern quite frankly. You know, all the polling that we do, all the, you know, surveys that are done, um, you know, shows that this is a a concern for retirees and for savers because it’s going to impact a lot of different things. It’s going to impact capital markets. Um, it’s going to in impact government spending. It’s going to impact uh, you know, inflation, um, interest rates. The list goes on and on.
in terms of entitlements. Um, so we’ve got social security, Medicare, Medicaid. Those are the major ones. Um, interest payments on those debts. You know, all of that kind of adds up in terms of, you know, the spending um that that’s provided in terms of all the benefits that we receive. Um, by 2035, you know, that that’s about 10 years from now. Uh it’s estimated that entitlements such as social security, Medicare, Medicaid, and debt interest payments will account for about 100% of government revenue for by 2035. So 10 years from now um we’re going to be uh you know faced with this uh you know increase in spending and you could see from the the chart the crossover around 2035. Um so this is a reality that we all have to deal with uh that the federal government needs to deal with. Um and so hopefully we’ll we’ll see a positive outcome. There are some scenarios that you know can give us a positive outcome and others a not so positive more kind of negative situation. Uh but we’ll see what happens. But in terms of getting prepared for that you know the Roth IRA conversion is one tool to kind of help mitigate uh the concern in terms of you know uh rising debt rising uh payments to all those different categories etc. This is a chart uh for all the or sorry the top income tax rates uh throughout history kind of the last 100 years or so. So you can see kind of in the war war years um you know the top marginal tax rate climbed to 90%. Um for the last 40 years it’s kind of been in between 30 and 40%. Um so uh most of the time status quo remains the same but we all have to be ready for different kind of tax environments as as this 2035 date approaches. Um you know the taxes are high uh no doubt about that. Um many of us are you know thinking about state income taxes. We’re thinking about federal income taxes and you know hopefully that uh you know the budget and the debt will be managed in such a way that these marginal tax rates stay kind of in the same range. But again, this is kind of to be seen and and we’ll see what happens with all those entitlements and everything else. When we think about our uh taxation, you know, when we think about the economic backdrop that uh we just went over, um there’s there’s three basic different kind of tax um tax environments that u our accounts going are going to be exposed to. And so one is the uh kind of taxable uh type of account. So that includes like index funds, stocks, CDs in a in an investment in a brokerage account or maybe it’s um you know interest earned from a savings account. That’s kind of the tax now category. Tax later is our um uh second category. So that’s retirement accounts basically that includes uh IRA, 401ks, annuities. So we’re taxed when we withdraw for those tax later uh types of accounts. And then thirdly there’s the tax never category. Uh so that includes Roth IAS, municipal bonds, HSAs. Uh so money goes in often uh after tax basis. Uh but because of the tax code, uh there’s no uh no tax on the gain. So these are three categories to kind of keep in mind and then uh just understand for your own financial planning, you know, how to kind of optimize and make it work in terms of your goals, your cash flows. Um and because we’re all exposed to these three categories, you know, tax now, tax later, tax never as we move towards retirement, uh we’re going to go through the the Roth conversion strategy, and it’s definitely something to consider. You know, um most of the scenarios that we run are positive. That being said, there’s no guarantee about the, you know, the future of the success of a Roth conversion. You know, tax diversification, account, retirement account diversification, all of that makes sense. But the key point there is diversification. Uh so yeah, you want to be thoughtful about any Roth conversions that you do and kind of sequence them accordingly and go through all the variables situations that we’re going to touch on uh shortly. So again, can be effective strategy to create that kind of after tax uh cash flow in the future. Uh so we’re going to go over the basics. We’re going to go over IRA owners, spousal strategies, and beneficiaries. All of the above needs to be considered in terms of you know a good decision for a Roth conversion.
So many of you probably know that there um there is a Roth IRA. A Roth IRA is similar traditional IAS in many ways. Uh but there’s some different differences that make them special. So one of the differences is that you don’t get a tax deduction when you make a Roth IRA contribution. Uh once your money is in a Roth IRA, it grows tax deferred kind of like in a traditional IRA. But the big benefit of a Roth IRA though is that um you know distributions can be taxfree in retirement in the future. Now there’s a couple of rules that you need to remember. There’s a 5-year rule for every contribution and a 5-year rule for every contribution that you do. And as long as you kind of abide by the 5-year rule, uh withdraw your money after 59 and a half, then those gains can be taxfree in that tax never category. Uh so, you know, big picture, that’s how a Roth account works. And there’s a little bit of a difference between a contribution and a conversion. They both begin with the letter C. So, make sure you’re distinguishing between them. Um, but as long as you kind of abide by all the rules that you could take advantage of this uh retirement strategy,
a few other rules. So, you must have compensation and generally that’s earned income from self-employment or wages, something like that. It cannot be passive income. Um, there are some limits in terms of what you can contribute to your Roth account. So, if you’re under 50, it’s $7,500. If uh you’re 50 and above, you can do a catch-up contribution. Uh that’s $8,600 total. Uh the good news is that there’s no age limit. And um and then but you do have to abide by the income limitations in terms of contributions. Um so, you look at your modified adjusted gross income for it’s kind of a different number for single filers and married uh couples filing jointly. Uh and here the number is basically up to single for single filers up to 168,000 for married couples 252,000. So you can make a Roth IRA contribution if you’re below those uh thresholds and if you are filing accordingly either single or married. So that kind of, you know, gives you a little bit of an intro in terms of, uh, making a contribution. And, uh, especially for young kids, uh, you know, in their 20s, their first job, you know, they’re going to be thinking about these, um, these contributions for early retirement saving. Um, and, you know, as we kind of in our 40s, 50s, if we could take advantage of this strategy, uh, we want to be taking advantage of it as much as possible, maximizing our contributions first and then thinking about, you know, conversions second. There’s also the opportunity to do a spoiler Roth IRA contribution that allows your, you know, the the working spouse to make uh contributions for the non-working spouse in the household. Um, you have to meet all the other requirements, but it’s just another place to to save for retirement. Here’s an example of a Roth IRA conversion. So, I’ll go through this um kind of step by step. Uh, when you do a Roth conversion, remember please that the tax is recognized in the year of the conversion. So, in kind of uh, you know, simple terms, a Roth conversion is when you take it um, out of a traditional IRA and put it into a Roth IRA. You take an account balance um, you take funds from your uh, traditional IRA and move it over to your Roth IRA. You can do that with a a 401k potentially as well, depending on the plan documents, but we’re just going to stick to the uh, the IRA situation for today’s purposes. So when you do that, when you move money from an IRA to a Roth IRA, you’re basically recognizing income because you’re effectively doing a distribution from your IRA. The great part is is that you’re moving it to uh another retirement account, but um you do have to recognize that income on your tax return. So in this case, Jill is going to convert $100,000 from her IRA to a Roth IRA. Um she’ll add that $100,000 to income. Um, that’s a big conversion all in one year, but in our example, Jill’s decided to do that. And then she’s her conversion will be taxed at Jill’s rate. So, she’s going to have income on her tax return an extra $100,000 and then pay taxes accordingly depending on her bracket.
There’s lots of reasons why you want to do a conversion. Um, and basically the the main one, the one that people think about the most is that you pay Uncle Sam now so that you can own your retirement account free and clear for the rest of your life. Um, and then you have those opportunities for uh future taxfree withdrawals. Everything else remain the same um out of that account. So, if you’re over 59 and a half um and you’ve got that Roth IRA, you’ve had it for more than five years, um then you could start to um you know, pull out that money uh tax and gain uh uh gain uh gains and the initial amount kind of tax-free. And then um again, for conversions, there’s a 5-year clock, a 5-year rule that’s applied for every conversion. So again, as long as you abide by the rules, um you got a nice um uh opportunity for um paying for living expenses and all your other goals in retirement. Let’s talk about who could do a Roth conversion real quick. So um the good news is here there are no restrictions on who can do a Roth IRA conversion. Uh and so doing a conversion again, taking from your Roth from your IRA, moving it to your Roth IRA, um there’s no minimum account. Um there’s no like uh income threshold. Anybody can uh do a conversion. No requirement to be working. Uh no age limits. Um you know, Uncle Sam basically the federal government encourages conversions to a certain extent because um you know, it’s it’s uh tax revenue for the federal government sooner. Uh so uh that’s a big you know reason that people are thinking about it that the federal government kind of tracks it uh but doesn’t mind if you do a conversion and totally allowed in terms of tax code.
Another thing to remember is that tax cuts and jobs act uh eliminated reccharacterizations for Roth IAS made in 2018 or later. So basically once you do a Roth IRA conversion um you uh it’s a permanent conversion. You’re stuck with it. Um, so there are a few circumstances where people want to kind of unwind it uh because you know their tax situations change, but just remember um it’s irrevocable. Once you do it, you’re kind of uh committed to it. Uh there’s no way to unwind it as of 2018. Another good thing about Roth IAS, um they have no required minimum distributions. So you basically decide when you want to take the distributions. There’s no RMDs to track. Um it allows your account to grow un uninterrupted taxree for life for your lifetime and also uh for your kids’ lifetime um uh part of their lifetime and uh you know can provide a tax-free inheritance to your beneficiaries to your heirs.
The biggest reason that people want to do a Roth IRA conversion is this hedge against rising taxes in the future. We saw the tax charts previously. So again, nobody has a crystal ball. As much as you might be convinced that you can kind of predict the future, I would strongly advise against that. Um, and that’s where usually diversification helps. But, uh, the main reason that, um, people want to consider a Roth IRA conversion is this hedge against future rising taxes. Um, future tax rates are unknown. Uh there’s lots of things that are unknown for the future, but uh conversions allow you to pay taxes at today’s tax rates. And then again, helping you to manage some other costs that are tied to your income to your modified adjusted gross income, which include Social Security benefits, Medicare Part B premiums.
So, Social Security, Medicare, touch on that real quickly. So, your IRA income um when you do withdraw money from an IRA through a distribution, whether that’s required or prior to RMDH, 100% of that is going to be taxable. Um it’s also going to be included in provisional income. And then, um also included in Medicare pricing. Your Roth IRA income on the other hand on the right hand side of the chart, not taxable time distribution after you paid the taxes for doing the conversion potentially or you just contributed to the Roth account. um it’s not included in provisional income and it’s not included in your modified adjusted gross income for Medicare pricing. Uh so you know some benefits down the road to kind of be realized um in terms of u you know doing those thinking about those Roth conversions. I’m going to go through a quick example here. So uh again you know the idea is to help you keep more money after taxes have been paid. Uh so this example here looks at uh you know someone over the age of 59 and a half considering a Roth IRA conversion of $10,000. We’re going to assume that the marginal tax rate now is 12%. Tax later rate is going to be 24%. So there’s a delta there’s a big difference between the tax now and tax later. 12% versus 24%. And this is the secret of this conversion and whether or not it becomes a success. It’s the delta the difference in tax rates. So, if this individual uh doesn’t complete a Roth conversion and just continue to let the money kind of pre-tax money grow for another 10 years, maybe at 5%, they would have approximately $16,289. If they take the money out, pay their taxes of 24%, they would have $12,380 left over. So, that’s scenario one. However, if they choose to complete a Roth IRA conversion, they would have to pay uh 12% of the money in taxes and then only $8,800 um uh dollars in the um and have $8,800 in the Roth IRA. So, assuming annual growth of 5%, you know, per year for 10 years, they would have about 14,334 that they can access income tax-free, you know, at the end of that term. So, that’s potentially a almost $2,000 difference or 15% more if they complete the Roth IRA conversion, all other things being equal. Um, and pay the income tax now instead of keeping the money pre-tax in the retirement plan or IRA, you know, paying the income tax later when they withdraw the money. So, this is a great simple inver conversion uh example. $10,000 converted. Uh pay tax now at 12% uh potentially avoiding a 24% tax rate in the future. And the difference between the two kind of all other things being equal um you know is close to $2,000. So $1,954.
Um so keep this example in mind in terms of um you know whether or not this is something that you want to consider. This chart can also help you understand, you know, how a Roth IRA might help given different tax brackets both now and later. So, as you can see, moving across the top where you find the current marginal tax rate. Let’s say it’s 12%. Now, you move down uh on the left hand side from there, um Roth IRA conversion, kind of a 24% tax rate in the future. And then this is where you end up with 15.8% more uh in terms of benefits. So kind of top axis, left axis, kind of zero in on that 16% number. So this is the basic math about how how a Roth IRA conversion works. Once you have this down, you’re in a much better kind of position to know um you know whether this is something uh that you want to consider. But uh please remember that this is just kind of the starting the starting point. there’s a lot more work and analysis that you need to do and ultimately software really really helps um with the idea of whether or not a Roth conversion will be beneficial for you because again everybody’s financial plan is very personal um it’s different there’s complexity there and you really have to run the numbers uh to get to a good decision we can help you with that so another you know part of today’s discussion is encouraging you to kind of reach out get help get assistance with this Roth IRA conversion Um, and again, there’s no obligation to become a client, but if you do become a client, then we will share everything, all the numbers so that you’re in the best position possible to make that decision. And if you don’t become a client, that’s okay, too, cuz we’re going to offer you all the information for you to kind of uh to help crunch the numbers and then for you to be in a better position to to make a good decision. So, I highly encourage you to kind of book a meeting when I launch the poll a little bit later on. But this is an example of kind of the the numbers and the analysis that we go through in order to decide whether or not whether a Roth conversion makes sense. So, you know, looking at total gross income, federal income tax rates, capital gains taxes, other income taxes, your effective income tax rate, uh was it going to be now versus later, the near-term in the future, your longevity, life expectancy, inflation, you know, uh all the above. So this is a snapshot of some of the variables that we’re going to be using in the analysis, but it kind of gives you a window into what uh the number crunching that goes on. And in our example here, you can see that, you know, there’s a big uh jump in federal income taxes paid up front. Um and then there’s a retirement horizon and then down the road um there’s less income tax paid. And so this is the whole concept. Again, getting back to those kind of previous two charts to um but you, you know, highly encourage you to do your homework to so that you know um you know how much to convert, whether this makes sense for you because not everybody should be doing a conversion. Um it sounds like a good idea, but again, you have to kind of have the right setup and the math has has to make sense for this to be a good uh positive outcome.
So again, like uh like we described with the the future chart, you’re looking at your future tax situation, today’s situation, and then everything else that’s involved. So income taxes, Medicare premiums, uh investment, income tax rates, um the 3.8% sir charge, uh all of the above needs to be factored in. Let’s talk about um you know the opportunity to uh again reduce those taxes uh in the future uh potentially increasing uh increasing the potential for more money um and go through this you know quick example. So here we see you know how much ordinary income a married couple both over age 65 can absorb in the various tax brackets. um you know $57,50 before moving to the 12% bracket, 130,000 before moving to the 22% tax bracket and 239,000 uh before moving to the 24% tax bracket. So uh this is all about the the opportunity to reduce those taxes uh you know creating the potential for more money again to be paid in uh in retirement expenses or pass along to beneficiaries. And this is, you know, the amount of tax that can be absorbed before moving to the next tax bracket. And this tax bracket management or kind of filling up the bucket, filling up the bracket. Uh there’s lots of different names for this strategy. Um but this, you know, this graphic kind of illustrates it all. You know, you want to fill up your bucket up until the next tax bracket. So this is a very important concept just to understand because it’s going to help you in terms of spreading your conversions over a number of years. And that decision is going to be based on you know what tax bracket you’re in, what tax bracket you need to be getting to um you know and all the other factors that go into your financial plan. So most of the time people are looking to convert up into the 24% tax bracket. Once you jump to 32% your break even for a Roth conversion is much more difficult. You’ve got 10% extra in taxes that you’ve paid that you’ve got to overcome in the future in order to make this conversion work. So again, be you want to analyze your tax brackets before and after the conversion. You know, typically you want to stay in that 10, 12, maybe up to 24% tax bracket when you’re doing it. Uh kind of watering um you know, the bucket uh but filling up the bucket or the bracket as much as possible to take advantage of that uh and not overpaying taxes. So hopefully this uh this this concept, this example illustrates the the idea to you. Uh but if you’d like more information, again, do set up a meeting. Here’s a quick chart on Medicare parts B and D. Uh so if you’re eligible for Medicare, there’s two premiums that you’re going to be paying. Uh Medicare part B and part D. Uh D for prescription drug coverage. Uh and part B is for hospital um or medical services. Your part A is a hospital uh services. uh there’s no charge for that premium, but your part B premium if you’re on Medicare is going to cover those doctor nursing services. So, how much you pay for part B and part D um is going to depend on your income. We actually have a whole webinar on this topic, but this is a good summary chart. Um so, if you’re an individual or if you’re a couple um you’re going to be paying you’re starting at a premium of $22 each per month uh to pay for Medicare Part B and $14 to pay for Part D. Now the bad news is that the more you make the more you pay and once you multiply that you know per month uh per spouse uh each spouse has to pay their own premium the dollars can add up pretty quickly. So, you know, uh, married filing jointly, uh, folks that have a, you know, modified adjusted gross income that’s greater than, you know, $342,000 up to $410,000. You they’re paying $527 each for each spouse. That’s $1,000 just in part B premiums plus $60 each uh, in part D premium. So, you could see where the stats add up. and these Irma brackets, these income related monthly adjustment amounts, this is a big reason why people want to do Roth conversions. So, um again, but you got to do the math. Um good problem to have, no doubt about it. Uh but just another cost for you to consider in terms of the break even u and Medicare parts B and D. One thing we encourage uh for folks um you know in the right situation is be on the hunt, be on the lookout for lowinccome years. And what that means is uh opportunities for you to do a Roth conversion in a low income tax bracket. So again filling up those brackets but filling up those lower brackets maybe 10 12%. So that can be uh you know business owner with low sales one year high expenses uh situation where family has uh you know non-recurring medical bills so their income is low that year or maybe uh in between jobs um kind of disability issues um you know taking a sabbatical uh just taking a couple years off changing careers like all of these are opportunities for low-inccome years but you have to be very thoughtful about it you have to be able to kind to consider, you know, the opportunity for a Roth conversion and kind of get to know this when the um you know, when the uh opportunity presents itself. So, um if you do have that low income year, um uh in the near future, then you want to give this again more more consideration because you have a bigger opportunity there. We’re going to talk about IRA owners. We’re about halfway through the webinar, so bear with us. It’s a long one, but there’s lots of information. Uh so IRA owners required minimum distribution. So remember for um you know traditional IAS for 40 401ks you basically have to start to withdraw from those accounts at age 73 or 75 if you’re not currently taking money out um if you’re currently not doing your um your your RMD. So, if you if you’re not required to take out money uh right now, uh age 73 or 75 will be when you start to uh when you’re required to take money out of that IRA or 401k. There’s penalties if you forget if you don’t take that IRA. Um you might be able to kind of appeal the decision, but it can result in an up to 25% penalty. Uh so, you know, you don’t want to be late. You want to be up to date on your RMD, your RMDs and your IRA balances. Your financial institution will let you know. it’s not going to be a surprise. Um, you found out about it today, so there’s no reason whatsoever to kind of not do your RMD, but again, age 73 to 75, that’s when you want to be on the lookout and start to plan for that. In terms of the percentage of your account balance that you’ be taking out, um, it’s about 4% to start at age 7375. So again, um if you’re the type of person that likes to worry about the decimals, then um you know, it’s 3.78% at age 73. I kind of look at as like 4% when you start. By the time you’re 80, it’s 5%. By the time you’re 90, you’re looking at somewhere around 8%. Uh so, you know, you’re going to be in taking out more uh as time goes on, but again, once you get once you get started, you’ll get used to it. And this and you’ll be an expert, you’ll be a pro at it. But uh just remember that it’s about 4% to start at age 73 to 75
since the ARM RMD age has increased to 73. Um you know some folks they’re kind of delaying those IRA withdrawals. But you just want to be thoughtful about that too. There’s always a consequence. there’s a domino in terms of uh you know delaying versus taking now um you know your uh your source of withdrawals to pay for expenses whether that’s coming from taxable tax deferred or tax-free accounts. This graph illustrates those, you know, requirement distributions at various ages. And the takeaway from this slide is the idea that, you know, as you have a bigger account balance as it’s growing at some kind of kind of normal rate of return over time, you know, from age 65 and into the future, um, you’re going to have some kind of a RMD uh, that’s payable down the road. So, at 73, depending on your, you know, uh, your account size, you know, you could be of a $56,000 or $150,000 RMD, depending on how much you’re starting with, whether it’s maybe a million or $2 million. It sounds like a big number, but um, you know, with inflation, with rates of return, with a good stock market, um, you know, lots of folks have, uh, IAS that are in these dollar amounts. Uh but even if you’re you know half of this then you still got to be just you know aware of this uh tendency for you know bigger RMDs as you age uh get into age 83 age 93 and above. And um you can see that you know in in this example the biggest number uh age 93 with a $2 million account you’re looking at you know almost $300,000 uh RMDs. And that’s where you’re being impacted by Irma. you’re being impacted by um you know part B higher part B premiums higher social security taxes all of these things again good problem to have but a Roth IRA gives you a chance to mitigate some of this impact this graph illustrates that the increase in RMD when compared to inflation so you’re assuming that the initial IRA balance is $1 million age 73 um inflation rate of 2.5% and then uh if we assume the tax brackets uh um you know deductions are adjusted at the rate of inflation. If the ARM RMD amount is increasing faster than inflation, it could push this taxpayer into a higher tax bracket. And so this is kind of the watch out, you know, again, inflation RMD amounts pushing up into the next tax bracket. Just something to be aware of and the chance for an RMD um you know, reduction and Roth IRA conversion to help with uh this entire thing. Again,
this is another example snapshot of the software that we kind of used to to go through all these different scenarios. So, looking at your sources of income, uh social security, other income, your RMDs, which are going to be income, uh on your tax return from your investment accounts, looking at your expenses, looking at your goals, everything holistically. And then if you do, you know, the probability of success with a Roth conversion, we want to estimate that as well. you know, is it a low probability, high probability? What are the cumulative taxes that you’re potentially going to be saving? What’s the impact on your total portfolio? Uh that’s going to be contingent on a bunch of different variables. But these are all the things that you want to consider for a Roth IRA conversion. This is kind of a snapshot of the data input. You know, looking at um you know, the um how much we’re going to be convert converting um over what time frame, uh the growth rates inside, etc. uh this is all the analysis that kind of goes into um goes into the data input to give us a good you know uh a good idea whether or not we should consider this this conversion more seriously or whether we should go forward or not. So again another chart illustrating the example in this case um you know after the Roth IRA conversion uh it was a positive impact so that’s good news. uh probability of success is 100%. Uh cumulative taxes went down by 140,000 in this example. Um and then to total portfolio assets actually increased by almost a million up to $5 million. So again, high net worth family. Uh good candidate to consider a Roth IRA conversion, you know, with thoughtful application. Um got a good probability of success and potentially saving money on taxes. Uh certainly nothing to sneeze at. $140,000 savings and then an increase in total portfolio assets for their beneficiaries.
Going to mention this also um in terms of again Roth IRA conversion and kind of uh you know a survivor strategy. So the whole idea is is that um when there’s uh you know two spouses in a family uh one passes away there’s a survivor because of the differences in um tax uh tax rates because of kind of the the change in income coming into the household it could have a big impact on um you know how much tax is paid to kind of generate the same amount of income. So left and right side of the screen, uh we’ve got Adam and an uh you know when they’re both um both alive, they’ve got, you know, pension income, social security for both of them, uh taxes that they’re paying and then after tax income of $110,000 and that puts them in the marginal tax rate of 12%. So, you know, this is something to be very aware of because, you know, if Adam passes away, Ann is on her own. Um, she’s going to be filing single at that point and then in order to generate that after tax income of $110,000, she’s got to pull out $98,000 in IRA and pension income. So, that’s going to be increase in her IRA withdrawal. Now, she’s also um on a solo social security um cash flow uh or platform. So, she’s only getting social security for herself, not for the both of them. And so, um, you know, unfortunately with this situation, Ann is now going to be looking at, you know, $18,000, uh, almost $19,000 in income taxes, um, in order to kind of have the same after tax income. Uh, so a big increase in how much she’s got to take out of her IRA and just, you know, um, a simple kind of change. You’d think that the the impact wouldn’t be so dramatic, but it is when you just think about, okay, you want to keep that after tax income the same, but you know what actually changes? And the two things that actually change are the amount of income that she needs to pull out and also her tax rate. So, food for thought again to think about that Roth IRA conversion, uh, you know, increase in taxes and, uh, and everything else. So here we have just kind of summarize appropriate Roth IRA conversion before the first death could be a viable strategy to help keep more money uh after income taxes have been paid. This slide demonstrates what it looks like when comparing tax brackets between married filing jointly versus single. Uh so again as you can see the single filer brackets are compressed when compared to married brackets. Um, you know, one reason for this is, um, you know, after the first death, the surviving spouse often retains all the assets and the increasing RMDs. Um, and but they’ll also be at higher tax rates. So again, something to remember, something to consider. Um, as a result, you may want to think about again whether or not this makes sense for your Roth IRA conversion. Uh, just taking advantage of that lower tax rate.
And then in terms of estate planning, uh beneficiary strategies, um remember that uh when children inherit a IRA, um they need to kind of uh empty that IRA within 10 years. Uh so if they’re the beneficiary personally, so here we have an example of Carrie, age 45. Uh assume she inherited $1 million IRA from her deceased mom. Um she doesn’t need the money. Uh so that’s good. And she doesn’t want to increase her taxable income. So, under the old rule r rules, she could actually stretch this uh IRA um only needs to take $25,000 in RMD in the first year, but there are some new rules. Um with this, uh you know, if she were to withdraw evenly over 10 years, she does have to empty the account. Uh she would take out $123,000. Uh so some some differences in terms of cash flows, taxes paid um you know depends on um you know what this money is earmarked for. And so Carrie, she does need to kind of be thoughtful about her financial plan, whether or not she wants to kind of take out the money sooner, maybe buy a home, uh maybe have it this money to start a business or some other purposes or whe whether she wants to kind of stretch it out over 10 years. Unfortunately, she cannot stretch it out over her lifetime, but um you know depending on her goal, she was to maximize and pay the least amount of tax possible. Uh so again um in this hypothetical example, you know, if uh if there was a a Roth IRA considered kind of could act add to her um after tax income and um you know again she’s single, she’s got taxable income of $9,000 a year without the inherited IRA. um she’s looking at 22% tax bracket. Um but again, her tax bracket’s going to change depending on how much she pulls out that she could jump into a 24 or 30% um tax bracket. So again, she just wants to be thoughtful about this. And this is the point of this whole kind of example. You know, uh understand what your potential taxes are for the future, understand what your goals are, uh and minimize taxes accordingly. Another example here, mom and dad, you know, IRA with son as a beneficiary. Uh they’re in the 12% tax bracket, son’s in a 24% tax bracket. So the uh the opportunity kind of jumps off the screen here in terms of a conversion for mom and dad save money uh on taxes, giving their tax rate and u versus the son kind of uh pulling money out in a taxable uh tax deferred account down the road uh and getting that 12% difference, saving the money on taxes.
Again, this beneficiary strategy could end up to be, you know, $50 or $100,000 difference. Depends on the size of the account. But, uh, the important thing is do the math. Uh, understand the differences in tax rates and see if there’s a good opportunity for tax planning.
Okay. And uh you know again we’ve got um you know some things to remember for uh the Roth IRA conversion. So remember uh no income limitations. Um your tax at ordinary income tax rates. Uh another thing that I didn’t mention but uh the deadline is December 31st. Uh so it’s basically a calendar year. You need to do that conversion within the calendar year. You can’t wait till the next year. Um sometimes you can wait till the next year with some other items like RMDs. your first RMD for instance um or doing a contribution but not so with a Roth IRA conversion the deadline is December 31st uh remember that magic number 59 a half uh that’s when you can start to pull out uh the money um taxfree as long as you met all the rules the 5-year rule for contribution from your first contribution or a 5-year rule from each conversion and then also be aware of all those unintended tax consequences that we described. You know, this is not a complete list, but uh kind of gives you insight into the impact on Social Security, Medicare premiums, and uh other things to consider. Goes without saying, but we’ll say it anyway. No guarantee that a Roth IRA conversion will achieve intended results. Um the rules might change. Uh hopefully not. Um but, you know, we got to figure out a way to pay for these taxes accordingly. You know, sometimes we have folks that uh clients that have all of their assets uh and it could be a big amount. It could be a, you know, average amount, but all of their assets in in their retirement accounts and u you know, they don’t have money in their savings account to kind of pay for the taxes. So, uh when you take money out of your retirement account, then the break even um analysis, it takes longer to break even if you’re taking out money from your retirement account versus paying for those taxes in a savings account or a brokerage account. So again, all part of the planning process, the mechanics of this to make sure you get it done right. Uh make sure that you understand the numbers and the risks. And again, another kind of summary charts to to drive home the point, you know, add up all your income, think about your RMDs down the future, your portfolio assets, total taxes paid, um etc. Think about your longevity, um you know, do the math, do the number crunching. Let’s use the software to help us get to the right answer. see if we could have a positive income in this case. Again, another positive outcome. Um 116,000 and $250,000 increase in total portfolio assets.
Okay. Well, that takes us to the end of our presentation. Uh so uh if there are any questions um please start to think about that and kind of uh you know put into the chat, put into the Q&A and I’ll do my best to uh answer your questions. Um but in conclusion um you know again Roth IRA conversion um it’s a great planning strategy definitely worth consideration you know make sure you’re doing your homework make sure you’re you’re utilizing all the tools and technology available to you. you know, do book a meeting with us if you’re seriously interested in this. Um, again, looking at tax diversification, looking at RMD management, um, estate planning strategies and benefits, um, and just again holistically in terms of your overall financial plan. Um, we’re here to help. I keep saying that because it’s worth mentioning. Uh, we want to be your first call in terms of financial planning and investment management. Uh, avoid any mistakes and and things like that. And these are all the ways that we help members, clients, and basically, you know, the whole idea is to increase your confidence. That’s our value ad. Um, you know, you know, we, uh, it’s a full-time job to kind of keep up with all the information, all the changes, whether through tax code or innovations with various strategies and concepts and, you know, active passive strategies and maximizing returns, minimizing fees, all of the above. Uh, so if you’re interested, uh, we’d love to help you with any of these topics. estate planning, your financial plan, uh your your investment management. Uh again, we’ve got lowcost passive strategies. We’ve got uh um separately managed accounts available to you, boutique money managers. Um the list goes on and on. Uh and here as I close up, um you know, this is kind of a summary of the digital estate planning service that we have available to you. So, this is tremendous value just in itself. highly encourage you to take advantage of this. Um, if you’re a client of ours, we can help you get your estate done, uh, no charge. Um, your estate planning done, no charge. Uh, it’s a complimentary benefit uh, for being a client of ours. Um, you know, doing this work with an attorney is $3,000. Uh, and then we can help you uh, get it done uh, no charge uh, through this uh, digital estate planning service. get your living trust done, your uh PA, power of attorney for financial medical done, HIPPA authorization, etc. Everything that kind of a basic estate plan needs. If you’re more complicated, we can help you with that, too. Um, you might need to see an estate planning attorney if you’re, you know, um, more complicated, but that’s okay. The benefits are worth it, but I will take you through the, you know, the things to think about and whether which direction to go. So, again, another great reason to give us a call and set up a meeting. Here’s my contact information. Uh my cell phone 213-320860. That is my direct number. So please do call any time. At this point I’m going to launch the poll um to give you a chance to set up a meeting. So would love to hear from you um and uh and just kind of help you with all your goals or even answer any questions. Uh so do uh please respond and then I see some questions coming up. So, keep those questions coming and um you know, we look forward to uh again helping you with this, you know, this idea of a Roth conversion, but remember, it’s just one thing. Um it’s one part of your plan. And um there’s probably 12 things that you need to consider inside of your financial plan. And I’m sorry it’s so complicated, but you know, with tax code, um, with investment management, with all that’s happening in your personal family, you know, long-term care, estate planning, income planning, tax minimization, fee, uh, minimization, return maximization, like all of these things that you want to consider to get the last dollar out of your uh, financial plan if possible. Okay. Uh, so uh, sorry I talked quickly. Uh I wanted to get through all the material uh for you and uh uh we’re just under an hour or so kind of going to questions so we made good time. Okay, let me get it set up here please. U it’s just me and uh kind of reading through these questions uh and uh I just want to make sure that I understand your question and uh answer it uh and then we could always book a meeting if if uh if helpful for you. Okay, first question. uh what age is recommended to start a conversion? Uh so the recommended part is going to depend on uh your uh your personal financial plan and uh your family situation, your income, um your expenses, your assets, all of the above. So, I can give you a guideline, but the agent to kind of start a conversion or start thinking about um you know, the sooner the better as long as you can kind of be confident in what your future is going might look like. And when I say be confident, you don’t have to know with certainty, but you can start that process in your 40s, you can start it in your 50s, but it’s not too late even in your 60s to do a conversion. the sooner the better. Uh because you get to uh you have more of a time horizon to break even and there’s also um you have control of those assets longer to kind of help your family um to to to follow up with the strategy so that you get to the kind of intended uh destination and have the intended result. So the answer to your question, you know, what age recommended to start a conversion, it all depends, but you could start in your 40s, like late 40s is probably the soonest that people do it. Um, you know, most people that are in their 30s, they’re doing direct contributions. They haven’t built up that IRA or 401k that much yet. Um, you know, people are typically doing that in, you know, later on their career as they increase their salary, as they increase their retirement assets. Um, so, you know, late 40s probably the soonest that I’ve seen. Uh, 50s is kind of the sweet spot sweet spot because you’re you’re really putting time on your side, but 60s totally worth it. as you get into your 70s, um it’s a little more difficult to break even, but that doesn’t mean you shouldn’t be do doing it. It really depends on your goals. Your estate planning strategy becomes more important at that point. Uh so those are all the kind of age brackets to to think about. Another question here, uh can you clarify if one does multiple Roth IRA conversions in one calendar year, doesn’t the 5-year clock start in January of that year? Um, so my understanding is that it starts when you do the conversion, not so much that month. Um, uh, I could look that up and confirm that and, uh, you know, but my understanding is that it’s the 5-year clock from when you do the conversion, not just like January of that year. Um, so um, if you, um, if I find your name, uh, you know, maybe we can kind of revisit that, I can ask a couple of other advisors or we can look that up in terms of, uh, the conversion rules. But my understanding is that you start in July, you got it’s July to you know July 5 years later. That’s kind of the clock that you’re uh you’re faced with um in terms of each conversion. Um it might be all like uh you know most people are not doing multiple conversions in one year but really you know at the end of the day it doesn’t make that much difference either because um you know a few months difference is not going to change the decision making uh for a conversion and you’re just waiting a few more months to kind of get those cash flows out. So uh but we can clarify that uh if that’s helpful. Another question here how do we determine the break even point? Okay great question. So that kind of comes to the the crux of the decision around a Roth conversion and break even is basically when you take your your um withdrawal which becomes taxable income you need to pay taxes on that and then after you’ve paid taxes after um you’ve got a lower u you know um you know total net worth um then you have to kind of factor that into your new account um because you pay taxes upfront But now you’ve got a new Roth IRA uh with the opportunity to start um uh generating returns and then in the future to kind of uh save in taxes. So that’s the break break even math that we’re talking about. You know, it’s all the upfront cost versus the um the down the road future benefits. And at some point, your Roth IRA conversion is going to hopefully uh become profitable because you’ve kind of you’ve made up that uh early um early tax liability payment. Um so your uh account value is larger. You’ve kind of uh made up for that that early payment. You’ve got a bigger account balance in your new Roth IRA. And then your future account balance benefits from um you know, no taxes. So you’re com you’re comparing your basic, you know, after tax um returns uh holding it in that IRA versus your after tax returns uh in the Roth IRA. And that’s the break even math. I hope that simplifies it, but basically there’s a bunch of variables that go into that. Looking at taxes, looking at cash flows, timing, and when you’re going to break even and ultimately be profitable.
Okay, another question here. Uh I talked about the free service. Um what exactly does that include? Uh so I’ll quickly go back to that um slide. Uh so this is the uh the summary. We use a digital estate planning service called trust and will. Um they’re very well established. Um, you can, uh, once I set you up, uh, on my dashboard, uh, you’re invited to, uh, set up an account, no charge, uh, as a client of ours, and then you can get your, uh, living trust, your will, medical, financial power of attorney completed. Um, you get a binder shipped to you. Uh, you have that notorized, and then it’s, uh, in effect fully legal, uh, throughout the United States. So, that’s how it works mechanically. The only thing that we ask to take advantage of this great benefit is that you become a client of ours. Uh so we make a big investment to have this to offer this uh to our members to our clients. And so we ask you to to kind of uh you know work with us, partner with us so that we can help you uh you know build on all the great information that we’re helping you with today and uh and get your financial plan done. Your estate plan is part of your financial plan. It’s so important. uh you know over the years I’ve been doing this a long time and then unfortunately you know people do pass away prematurely um it could be a crazy accident like a diving uh you know a diving expedition in Hawaii or it could be something else or falling off your roof and you know these things happen you know both younger and after retirement. So having an estate plan if you have younger kids um if you’re a grandparent and your kids have kids and you have grandchildren everybody needs an estate plan uh because you don’t want to leave it to chance. You do not want to leave this to the uh the state that you reside in state of California or anywhere else. Uh you want to have control and you want to leave your estate in good order so that your beneficiaries can benefit. So those are all the things that kind of uh you know play into the estate planning uh process and again uh no charge if you become a client. So hopefully you take advantage of it. Thanks for the question. Another question here. If uh if you pay taxes out of pocket, invest the whole conversion, the gains will make up for the taxes paid tax-free. Yes. Um so that’s that’s kind of the idea. um you’re paying for taxes out of pocket. And what we mean by that is out of your savings account or your taxable investment account. You’re not generally 99% of the time people are paying for their taxes out of their non-retirement accounts. And the reason for that is because they want to keep their retirement account uh as big as possible to realize those gains and those benefits down the road. Because if you’ve taken if you’re paying for taxes out of your traditional IRA, your Roth conversion is going to be smaller. So when your Roth conversion is smaller, it’s got, you know, uh it takes longer and it takes more return in order to get back up to your original balance and then, you know, to build up a nest egg that’s even bigger so that it kind of makes all of this worthwhile. Um, so that’s the whole idea of uh break even math uh for uh Roth conversions. Thanks for the follow-up question. Another question here about estate planning. After the plan is notorized, would you need to get it funded? Uh so the answer is yes. That’s part of the the steps in terms of estate planning. So if you have a a new living trust, for instance, then you might want to retitle your real estate in the name of your uh living trust. uh you have a choice in terms of your taxable accounts whether or not you want them to be titled in the name of your living trust or personally and attach beneficiaries to them. So you can go either way. Uh there’s no wrong answer in terms of that. But yes, you do need to fund your estate plan. And what that means is basically uh make sure all of the titling, all of the beneficiary designations are up to date so that uh you know the right people inherit your money. there’s nobody that’s being disinherited uh from your estate and it’s funded uh you want to fund either your accounts or your trust uh accordingly with your real estate and the reason is because you know on your deed on your title for your real estate there’s no line that said this is the beneficiary you know you know with the county that you reside in so you need a living trust to avoid probate um otherwise the the state that you reside in state of California or elsewhere they’re going to make the decisions and then it goes through the courts It goes through the attorneys and the judges. All of that is extra time, cost, and complexity adds to potential frustration for your beneficiaries. Uh so getting your estate plan done up front. Um it’s just a tremendous value. Makes a world of sense. Uh but the whole idea is to get completed.
Okay, I think that’s all the questions in the chat. Uh got a couple questions in the Q&A, so let’s keep going. um what software do you utilize for these projections and analysis? So, we use a software called e-money um internally through our broker dealer. It’s called Wealth Vision, but it’s basically the same uh planning software. Um it’s institutional grade. It’s uh probably the, you know, one of the best planning software uh platforms available. Um it again, it’s institutional grade, so it’s fairly expensive, but uh we do all the data input. uh you know we’re very familiar with the software so we can get it done quick. Uh you know the whole process is you send us your statements uh you know we input the data uh we get together have a meeting make sure it’s all correct we do all the number crunching and then share the results and then send you a deck at the end of it all and that’s your financial plan that’s your Roth conversion you know all in a in a very concise and usable format. Um, so the software is super handy because, you know, it’s audited. You can rely on it. And I have some clients, you know, they’re very good at Excel. And what they’ll do is they’ll they’ll do their own financial planning with Excel, but they’ll use, you know, our planning process to confirm all of their numbers. Um, so because we all need checks and balances with Excel because there’s so many calculations and so many variables, uh, because we’re looking at tax rates and tax code and everything else and, um, you know, it just makes more sense to to to use planning software that’s able up, you know, up to the task uh, for a Roth conversion to get us a good answer and whether or not this is worthwhile. Another question here, your complimentary services provide help with setting up a trust. Um yeah, absolutely. So again, it’s on the screen. Um if you contact me, if you become a client, um we will uh for a no cost um service uh help you get your living trust done, your will done, um your power of attorneys completed. Again, you need to get it notorized, but then it’s, you know, in effect legal, executable, and uh and will help your family. So absolutely, uh we just started offering this this year and uh tremendous value. this in itself is worth becoming a client. But I know I’m biased. So, you know, don’t hate me for that or excuse me for that. But, you know, we just try to, you know, provide all the benefits we can to help people uh get value.
Okay, last question. Uh, should a Roth IRA be invested with more equities u or something else? Uh, good question. So, that’s asset alloc asset allocation. Uh, there’s two parts to that answer. One is yes more equities generally but it depends on your risk tolerance. It depends on your financial plan. It depends on your kind of confidence in the markets your time frame but more equities is generally the rule of thumb and uh you know fixed income kind of more to be avoided. Uh but you want to be balanced. We have fixed income alternatives actually that you should really investigate especially for a Roth conversion because you want a growth strategy. you want to capitalize on that uh that u you know beneficial tax bracket, no tax situation um you know getting you know you know potentially converting at a lower tax bracket and having uh you know savings and and uh extra gains that are not taxed down the road. So uh you know equities are an important part of that having equity allocation and uh and make sure you break even on the tax liability that you had up front. So going back to that break even math. So the answer is yes. uh equities definitely need to be considered but again in terms of you know what type of portfolio whether that should be aggressive growth a dividend portfolio some other growth strategy a balance strategy and the all the asset allocation that goes within each of those port portfolios or the money manager approach. So it can get a little bit of uh you know complicated but you know within like 15 20 minutes of uh you know a good description then you kind of get it entirely and then kind of you know move on to the next uh the next uh part of the process in terms of understanding you know the conversion mathematics
just mentioned uh great webinar so thank you for saying that. I love uh I love the shout outs and they make me feel good. Um, one more question here. Uh, great response, by the way. Great group. Uh, so you keep the questions come coming. I love that. Um, it says, “When you have a 10-year age difference between spouses, so maybe 60 and 70, the younger one wants to do a conversion married filing jointly, does that affect the Irma for the older spouse?” And um, you know, the answer is yes. And also keep in mind that uh you know your Irma will uh for the younger spouse that Irma calculation will kick in in a couple of years. So uh really all depends in terms of you know what point you want to do the conversion for your your financial plan. But you know whether you’re 60 or 70, you’re kind of in the zone for doing a conversion. Um you know whether or not you have kids that’ll ultimately impact your decision. But, you know, there is a 2-year look back uh in terms of Medicare calculations and looking your at your modified adjusted gross income. Um, you want to factor that into your decision. Uh, the 61y old, you’re going to be eligible for Medicare by the time you’re 65. So, that’s in four years. Um, so again, it’s all going to depend, but um, you know, there will be definitely Irma consequences uh, for both of you. If you’re putting on um, you know, more income onto your income tax return by doing a conversion, that that’s going to impact your Medicare costs because that’s going to impact your modified adjusted gross income. So, um, that’s my best answer for that. Uh, but again, you want to do the planning and kind of talk that through. Okay, with that let’s pause. Uh thank you so much everybody. Uh again here’s my contact information. Uh please do give me a call. Look forward to seeing you at our next webinar and uh that’s on tax planning and then the next one after that uh estate planning. Uh so with that uh thanks again for all your participation. We really appreciate it and look forward to uh seeing you at our next event. Take care.