Episode 74: Why Now Is the Perfect Time to Do a Roth Conversion with David McKnight

The coronavirus downturn in the market is actually the perfect time to do a Roth Conversion because of the double sale that’s going on. The first sale involves the next six years where we get to enjoy the lowest tax rates we are likely to see in our lifetimes. The second sale is due to the 35% drop in the stock market, your assets are now at much lower values and that means the tax on a potential Roth Conversion is also 35% lower. If you were to hypothetically convert a $1 million IRA this year your tax bill would be approximately $299,112 or a 29% effective tax rate. If you take in the decline in the stock market of 35% your tax bill is a little more than half. If the stock market goes through a massive recovery over the next few years having done this Roth Conversion, all of that recovery occurs in your tax-free bucket. If the market is down 25%, your portfolio has to recover 33% to get back to where you started. If the market drops 50%, you need a 100% recovery to get back to even....