Deep Value ETF Accumulator

As a self-directed investor, and avid consumer of personal finance content, I have been inundated with reasons to convert traditional retirement account assets to Roth accounts and how to go about doing so. Yet, I have not heard anyone discuss what I think could be a rather simple method to convert some of these assets. This strategy is probably most useful for someone who is not in a high tax bracket and does not have a huge sum of money to convert. I call this strategy “The Part-Timer’s Roth Conversion Strategy”.

If someone is inclined to work part-time during their retirement years, they could indirectly convert up to $8,000 per year from their traditional IRA to their Roth IRA, assuming they are over 59 ½ years old. Additionally, a married couple could indirectly convert $16,000 per year using the same strategy. This strategy could also work for those who chose to start their Social Security benefits prior to their full retirement age.

Here are the steps to make these Roth conversions a reality:

1. Work a part-time gig and earn at least $8,000 during the year or $16,000 for married folks (2024 maximum IRA contributions).
2. Withdraw $8,000 from your traditional IRA and send it to your Roth IRA.
3. If your spouse doesn’t have traditional IRA assets to convert, and you can earn $16,000 per year at yours and/or their part-time gig, then withdraw another $8,000 from your traditional IRA and send it to your spouse’s Roth IRA.
4. If you are receiving Social Security benefits earlier than your full retirement age, this strategy can still work, since you can earn up to $22,230 without affecting your social security benefits.
5. You may want to withdraw a bit more than the $8,000 or $16,000 from your traditional IRA to cover the taxes that will be due. Most people who might choose this strategy are probably in the 12 to 22% tax brackets.

I am not a tax advisor or a financial advisor, so you will want to consult with one if you have any of the following concerns about implementing such as strategy:

– How your Social Security benefits will be taxed
– How much you will be charged for Medicare premiums based on IRMAA (Medicare income-related monthly adjustment amount)
– How traditional IRA withdraws, and additional part-time income will affect your current tax bracket
– How earnings from these new Roth IRA contributions can be used in the future based on the Roth IRA 5-year rule
– How traditional IRA withdraws, and additional part-time income will affect your Health Insurance Marketplace subsidies

As with any advice, please perform your own due diligence to make sure this strategy is beneficial to your situation.

Thanks for reading this article. If you found it useful, please share it with someone you know who could use this information.

Micah McDonald (aka The Deep Value ETF Accumulator)