Episode 248: Are You Doing Roth Conversions the Wrong Way?

The final part of the Retire With Style Live Q&A has Wade Pfau and Alex answering listener questions on tax-efficient retirement withdrawals, Roth conversions, Social Security, sequence-of-returns risk, annuities and buffered ETFs. They argue that Roth conversion decisions should be driven by effective marginal tax rates, including knock-on effects on Social Security taxation, IRMAA, capital gains, deductions and ACA subsidies, rather than by filling brackets. The episode also covers withdrawal sequencing across taxable, IRA and Roth accounts, using saved HSA receipts to pay conversion taxes, MYGA ladders before Social Security, and annuities inside IRAs for RMD planning.

1. Roth conversion decisions should account for the effective marginal tax rate, including interactions with Social Security taxation, IRMAA, capital gains, deductions and ACA subsidies.
2. Converting too much to Roth could leave too little taxable income later to use the standard deduction and other low-tax opportunities.
3. Saved HSA receipts may provide tax-free funds to cover the tax bill in a year with a large Roth conversion.
4. MYGA ladders can act as a buffer asset before Social Security while interest stays tax-deferred, and buffered ETFs trade some upside for downside protection.