Success Story Series! (1)

Korey Knepper |

Today is the first edition of the success story series. This series is meant to be inspirational, and educational for people who might be in a similar situation. This specific situation we were able help bring this client from wondering if they could retire, to not just retiring, but having a plan to build wealth for their family going forward. This started without that much capital in the grand scheme of things, about $250,000. This particular client was a retired military reserve member, so there was a good pension in retirement. This made the "can I retire question" easy for me, the real question that they weren't thinking of was how to avoid RMDs. RMDs are Required Minimum Distributions from a Traditional IRA. They can take a large toll on what a couple can pass to their children. With the hope that this money can double over the next ten years, the initial RMD on $500,0000 is about $19,600. That doesn't seem too bad, and it can probably pay for a very nice vacation or something. The problem comes later down the line, as the factor increases every year to make your RMDs even larger. Ten years later, that RMD withdrawal will be over $31,000 that you have to take out and pay taxes on. So, what we did to preserve the wealth they worked so hard for, was a Roth Conversion. This is essentially where we decide how much to take out every year, how to do it while having a minimum affect on social security. This is a lengthy process that can take ten or more years. If done correctly though, the differences are life changing for your family. If you pass on a traditional IRA, then your heirs will most likely fall in the ten year rule. This is where they have to pull all of the money out by year ten after passing. The same goes for a Roth IRA, the difference is you already paid the taxes on that money, so your heirs can usually withdraw it tax free, where as with the traditional they would have to pay income tax on those withdraws. The Roth Conversion doesn't make sense all the time, but in this specific scenario it did. And it is going to allow them to become millionaires before the age of 80 according to our financial planning model. If you have more questions regarding Roth Conversions, or start your success story, use this link to set up a meeting. Remember, the start of your success story is only a meeting away! Thanks for reading!