Episode 345: How to Avoid the Roth Over-Conversion Trap

In today’s episode, David McKnight focuses on whether you should do a Roth conversion, how much you should convert per year, and whether it’s possible to over-convert to Roth. David explains that an effective tax rate is the actual percentage of your income that you pay in taxes after accounting for deductions, exemptions, and credits. For David, the only reason you should do a Roth conversion is if you believe that your effective tax rate in retirement will be higher than your marginal tax rate today. David touches upon a couple of reasons why your effective tax rate in retirement could be higher than your marginal tax rate today. Remember: the national debt is projected to be $57 trillion by 2035. If Trump extends his tax cuts, you can layer another $5 trillion right on top of that… According to a recent Penn Wharton study, if the U.S. doesn't right its fiscal ship of state by 2040, no combination of raising taxes or reducing spending will arrest the nation’s financial collapse. Befo...