Dave Ramsey Urges Near-Retirees to Skip Roth Conversions Over 5-Year Rule
Updated
Updated · AOL · Aug 15
Dave Ramsey Urges Near-Retirees to Skip Roth Conversions Over 5-Year Rule
3 articles · Updated · AOL · Aug 15
Summary
Ramsey said people already retired or within five years of retirement should generally avoid Roth conversions, arguing they have too little time to benefit and may need the money back too soon.
The advice hinges on the five-year rule and the upfront tax hit: converting $50,000 from a traditional IRA in the 22% bracket would trigger an $11,000 tax bill.
Financial planners dispute his reading, saying the five-year rule mainly guards against a 10% early-withdrawal penalty that usually no longer matters after age 59 1/2.
Many advisers instead favor partial conversions in lower-income years before required minimum distributions begin at 73, when taxable withdrawals can push retirees into higher brackets.
The broader takeaway is that Roth conversions remain case-specific, driven by expected future tax rates, available cash, Medicare surcharge exposure and estate goals.