Let’s break down how to avoid the pitfalls—and how one couple, Bob and Sally, turned a good Roth conversion strategy into a great one.

1. Roth Conversions and Tax Bracket Management

Many advisors recommend doing Roth conversions up to a certain tax bracket—like 10%, 12%, or 22%—to “fill the bucket” without spilling over into higher brackets like 24% or 32%.

Why? Because later in retirement, Required Minimum Distributions (RMDs) can push you into a higher tax bracket. That’s exactly what was projected to happen for Bob and Sally. Converting early at a lower rate would reduce their taxable IRA balances and lower future RMDs.

Initially, they planned to convert up to the 22% bracket. This approach saved them an estimated $485,000 in tax-adjusted portfolio value by age 90—already a win. But it could’ve been better.

2. Beware of the IRMA Surcharge Trap

What Bob and Sally didn’t expect? Their Roth conversions bumped their Modified Adjusted Gross Income (MAGI) just $1 over the IRMA threshold—triggering higher Medicare premiums.

The Income-Related Monthly Adjustment Amount (IRMAA) increased their Medicare Part B and D costs by $5,828 annually.

But that’s not all. Because they had to withdraw extra funds from their IRA to cover those healthcare surcharges, the opportunity cost over 25 years was an estimated $47,000 in lost investment growth.

Just one dollar over the limit created a compounding penalty that turned a good tax strategy into an expensive oversight.

3. A Better Strategy: Stay Below IRMA

Once they revised their approach and aimed just under the IRMA threshold, Bob and Sally saw huge gains.

Instead of converting all the way to the 22% tax bracket, they converted slightly less—but avoided IRMA surcharges. That small adjustment increased their projected portfolio value from $485,000 to $760,000.

Why the jump?

• Lower healthcare costs
• More assets left in their accounts to compound
• Better overall tax efficiency

Sometimes converting less can mean keeping more.

4. The Other Hidden Taxes of Roth Conversions

IRMA surcharges aren’t the only danger. A Roth conversion also affects:

• Social Security “tax torpedo”: Increases in provisional income can make up to 85% of your Social Security benefits taxable.
• Capital gains taxes: Higher MAGI can push long-term capital gains and dividends from 0% to 15% or even 20%.
• Your heirs’ tax brackets: If your beneficiaries are in lower tax brackets, they might have paid less tax on inherited traditional IRA dollars than you will converting them now.

Every tax lever affects another—and ignoring that can lead to thousands lost.

5. The Case for Comprehensive Roth Planning

Smart Roth conversion planning involves more than just your current tax bracket. It means understanding:

• IRMA thresholds
• Social Security taxation
• Capital gains interaction
• Future tax rates for your heirs
• Portfolio growth expectations
• Medicare costs

Many retirees benefit from using retirement planning software or working with a financial planner who models these interactions. At the very least, understanding where each tax trap lives on the map gives you a fighting chance.

6. Final Takeaways

If you’re doing Roth conversions—or thinking about them—keep these takeaways in mind:

• Roth conversions are powerful, but precision matters.
• IRMA surcharges can turn small missteps into expensive, recurring costs.
• Consider all the tax interactions, not just income taxes.
• Legacy planning and Medicare costs should factor into your strategy.
• A little foresight could mean hundreds of thousands in extra retirement dollars.

The right Roth strategy is less about brute force and more about finesse. Get it right, and your future self—and your heirs—will thank you.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

The post The Hidden Traps of Roth Conversions: How to Maximize Tax-Free Retirement Without Triggering Costly Surprises appeared first on ROI TV.

1. The Goldilocks Rules of Retirement Withdrawals

Withdrawing from retirement accounts isn’t just about timing it’s about getting it “just right.” Ric explained that pulling money out before age 59½ hits you with a 10% early withdrawal penalty, plus income taxes. Wait too long, and the IRS slaps on an even bigger fee: by April 1 of the year after you turn 70½, you’re required to take minimum withdrawals (RMDs), or you could face a 50% penalty.

That’s right between late withdrawals and missing the mark on the amount, you could owe up to 95% in penalties. Ric’s advice? Don’t guess. Work with a qualified tax preparer or advisor who knows how to thread the needle.

2. Saving During Career Interruptions

Mary called in with a common issue: she’s working temp jobs after being laid off and doesn’t know what to do with her leftover income after covering essentials. Ric encouraged her to strike a balance—build emergency savings first, then contribute to retirement, even if it’s just a little.

Skipping savings during tough times might seem logical, but retirement is inevitable. “Don’t stop saving,” Ric said. “Even if it feels small, consistency is key.”

3. Estate Taxes: Federal vs. State

Opening a loved one’s estate can raise unexpected questions. One listener asked about federal estate taxes after her mother-in-law passed. Ric broke it down: if the estate is under $5 million ($10 million for couples), it’s exempt from federal tax under current law. But some states still tax estates separately, so working with an accountant is essential to avoid surprises.

4. Long-Term Care Insurance: A Lifeline for Longevity

If your family tree is full of folks living into their 90s, you should be thinking about long-term care insurance. That was Ric’s advice to a caller whose grandparents lived well into their 90s.

The average cost of long-term care is $84,000 per year, and many people need care for over a decade. Without insurance, this can devastate your savings. Ric’s message was clear: “If you’re likely to live a long time, plan for the years when your health won’t keep up.”

5. Cashing Out Insurance? Know the Tax Consequences

Another caller wondered about taxes on a life insurance cash-out. Ric explained that only the gain the amount received above what was paid in premiums is taxable, and it’s taxed as ordinary income. That rate can be higher than capital gains.

Before cashing out, consider the alternatives. If left intact, the policy’s death benefit may go to heirs tax-free. Make sure you ask the right questions before making irreversible decisions.

6. Carol Joynt’s Financial Nightmare and What We Can Learn

Carol Joynt inherited her husband’s D.C. restaurant and a $3 million tax mess. The IRS came calling, but she was unaware of the fraud. Thanks to “Innocent Spouse” protection, she avoided liability.

Carol’s advice? Don’t be blind to your partner’s finances. Hire an independent accountant. File separate tax returns if you manage money separately. Her story, captured in her book Innocent Spouse, is a wake-up call for anyone who thinks “it could never happen to me.”

7. Roth vs. Traditional 401(k): Which One Wins?

Should you choose a Roth 401(k) or a traditional 401(k)? Ric said if you’re in a high tax bracket (25% or more), go traditional. You get the deduction today, and you’ll likely be in a lower bracket later. Only those in lower brackets (15% or less) should favor Roth contributions, where immediate tax breaks aren’t as valuable.

8. Facing Financial Crisis? Get Help Fast

Ric’s parting advice: if you’re facing IRS problems or financial uncertainty, don’t go it alone. Professionals exist for a reason. And don’t be ashamed of financial struggles. Carol Joynt’s public story shows that resilience starts with transparency.

The Bottom Line

Retirement isn’t just about saving it’s about protecting what you’ve saved. From withdrawal rules to estate planning and insurance needs, the stakes are high and the rules can be punishing if misunderstood. Whether you’re entering retirement or just starting your journey, remember Ric Edelman’s core message: preparation is everything.

All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Whenever there are hyperlinks to third-party content, this information is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals or points of view outside Edelman Financial Engines. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice.

Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.

The post Retirement Rules, Long-Term Care, and the High Cost of Financial Mistakes appeared first on ROI TV.

The Power of Compound Interest and the Rule of 72

We kicked things off by highlighting compound interest, famously referred to by Albert Einstein as the “eighth wonder of the world.” Unlike simple interest, compound interest grows your money exponentially over time by earning interest on both your initial investment and accumulated interest.

They broke down the Rule of 72, a simple formula to estimate how long it takes for an investment to double. Divide 72 by your expected rate of return: a 7% return means your money will double in about 10 years. But at 2%, it takes a staggering 36 years. Clearly, rate of return and time are your biggest allies.

Start Early, Save Consistently

To drive home the importance of starting early, they compared saving $100 a month beginning at age 25 versus age 35. That 10-year head start could result in an additional $100,000 or more in savings over a lifetime thanks to compounding. Even modest annual increases in savings can have a profound impact on retirement outcomes.

Calculating Retirement Spending and the Shortfall

Next, we explained how to calculate retirement needs. Start with your current expenses and adjust for 3% inflation. Subtract expected income like Social Security, then multiply the annual shortfall by 25 to find your target retirement savings. For example, someone expecting $144,000 in annual expenses with $55,000 from Social Security needs to fund an $89,000 shortfall. Multiply by 25, and you get a $2.2 million savings goal.

Understanding the “Retirement Smile”

Spending in retirement isn’t linear. I want to introduce you to the “retirement smile”: higher spending in early retirement (“go-go years”), a dip during the “slow-go” years, and a rise again due to healthcare costs in the “no-go years.” Many retirees spend more in retirement than they expected, making accurate planning crucial.

Applying the 4% Rule

The 4% rule remains a helpful benchmark. If you retire with $1 million, withdrawing $40,000 per year (4%) gives you a strong chance of not outliving your money, assuming a 6% return. However, the duo stressed that withdrawals should be adjusted dynamically based on market performance and personal needs.

When to Claim Social Security

Social Security claiming strategies also play a huge role. Claiming at age 62 could reduce benefits by 30%, while delaying until 70 can boost payments to 124% of your full retirement amount. We suggested evaluating factors like health, income needs, and whether you’re still working when making this decision.

Reevaluating the Rule of 100

The traditional Rule of 100, which suggests subtracting your age from 100 to determine stock allocation, was challenged. They argued that allocation should reflect individual risk tolerance, goals, and legacy plans. For example, a risk-tolerant investor may opt for more stock exposure, while others may want more cash for security.

Tax Planning and Roth IRA Conversions

One of the most actionable strategies they shared was Roth IRA conversions. With tax rates expected to rise in 2026, converting pre-tax retirement funds now could yield massive long-term savings. Converting in lower tax brackets (like 12% or 24%) today helps reduce your required minimum distributions (RMDs) and future tax bills.

Tax Allocation Across Account Types

Understanding how different accounts are taxed is another key strategy. Use tax-deferred accounts (like IRAs) strategically during low-income years, and prioritize Roth IRAs for tax-free growth. Taxable brokerage accounts provide flexibility but may generate capital gains.

Plan for Longevity

With life expectancy on the rise, couples have a 50% chance one partner will live to 92. We emphasized planning for a longer-than-expected life to avoid outliving your money, especially considering rising healthcare costs.

Use the Retirement Readiness Guide

Finally, the team encouraged everyone to download their Retirement Readiness Guide. It’s packed with practical tools to calculate savings targets, plan withdrawals, and optimize investments for a confident retirement.

Bottom line: Retirement success is about more than just saving—it’s about making smart decisions across the board. The earlier you start, the more prepared you’ll be to live your best retired life.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post The Formula for Retirement appeared first on ROI TV.

In this Money Makeover session, financial experts we broke down how to build a stronger retirement plan that balances smart saving, smart spending, and smart investing.

Here’s what you need to know to get your finances makeover-ready.

1. Retirement Planning Starts with Setting Clear Goals

Many people enter retirement without a clear plan—and it shows.

• Between 2016 and 2021, the average retiree’s monthly expenses rose by $1,000.
• 49% of retirees spend more than they anticipated.
• Retirement often feels like “Saturday every day,” leading to more discretionary spending.

The first step: get clear on your goals.
When do you want to retire?
How much do you want to spend?
Do you plan to travel, buy a second home, or fund grandkids’ education?

Answering these questions is the foundation of a sustainable retirement plan.

2. Budgeting: Needs First, Wants Later

Americans are currently spending $7,400 more per year than they earn—a dangerous trend.

A simple rule can help you stay on track:

• 50% of income for needs (housing, healthcare, food)
• 20% for savings
• 30% for wants (travel, hobbies, entertainment)

Following this structure before and during retirement helps prevent lifestyle inflation and debt accumulation.

3. Retirement Savings: Employer Matches and Beyond

Good news: 52% of employees are now saving above their employer’s match.

Vanguard’s study shows that raising your contribution rate even a little each year makes a huge difference.

• Saving 2% of your salary could grow to $119,000.
• Saving 6% could grow to $356,000—nearly triple.

Aim for 15%–20% of your annual income if possible. And always grab the full employer match—it’s free money.

4. Tax Planning: Take Advantage of Current Low Rates

Tax brackets are expected to rise in 2026:

• 22% bracket → 25%
• 24% bracket → 28%
• 32% bracket → 33%

Use today’s lower brackets to your advantage:

• Convert traditional IRA funds to Roth IRAs
• Diversify your retirement income streams
• Invest aggressively in Roth IRAs for tax-free growth

Roth conversions might cause a short-term tax hit—but they can save you tens (or hundreds) of thousands over a lifetime.

5. Consolidate Accounts to Simplify Life

Many retirees have a hodgepodge of accounts—old 401(k)s, IRAs, brokerage accounts.

Consolidating can:

• Reduce management headaches
• Lower fees
• Simplify required minimum distributions (RMDs)
• Make tax filing easier

Consider using low-cost custodians and ETFs to streamline your investments even further.

6. Avoid Early IRA Withdrawals

Need cash? Think twice before tapping your IRA early.

Pulling out $100,000 before age 59½ could cost you $38,000 in taxes and penalties. Worse, that lost money could have grown into hundreds of thousands if left invested.

Build an emergency fund and short-term savings outside of retirement accounts to avoid costly withdrawals.

7. Stress Test Your Retirement Plan

Case studies like John and Sally (age 57) show how easily a plan can fall apart without proper testing.

Their original strategy depleted funds by age 82.
But by working a few more years, saving more aggressively, or reducing discretionary spending, they could extend their nest egg through their entire lifetimes.

Stress testing helps you uncover weak points—and fix them before it’s too late.

8. Use Financial Tools and Get Educated

• Budget templates
• Retirement calculators
• Portfolio risk assessments
• Tax planning strategies

Financial education and action go hand in hand. The more you understand your money, the better decisions you’ll make for your future.

Final Thoughts: Your Retirement, Your Rules

A great retirement isn’t just about how much money you have—it’s about having a plan that aligns with your goals, your values, and your vision for life after work.

With the right mix of saving, spending, investing, and tax planning, you can enjoy the retirement you’ve earned without unnecessary stress.

Start your financial makeover today—you deserve it.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post The Ultimate Money Makeover: Retirement Planning Strategies to Secure Your Future appeared first on ROI TV.