As a master elite IRA advisor certified by Ed Slott and Co., the financial planning expert Brad Pistole knows a thing or two about individual retirement accounts and the increasingly popular strategy of Roth conversions.
For example, Pistole is well aware that the original Setting Every Community Up for Retirement Enhancement Act increased the required minimum distribution age — the age at which taxpayers must begin taking distributions from traditional retirement accounts — from age 70.5 to age 72. Likewise, he recently told ThinkAdvisor, the Secure 2.0 Act again increased the RMD age, from 72 in 2022 to 73 in 2023 and beyond. Under the law, the age is set to again increase to 75 in 2033.
Unfortunately, Pistole recently told ThinkAdvisor, this important information is not universally known — including among television and online financial gurus who have amassed audiences in the millions.
“Dave Ramsey has a video highlight on his YouTube channel, with its 4.5 million subscribers, that tells people the RMD age is 72.5,” Pistole said. “That video has amassed almost 730,000 views in the years since it was published.”
In the video, Ramsey is discussing an audience question regarding the potential wisdom of making a Roth conversion. Beyond offering the incorrect RMD age, Ramsey also implies that taxes on the conversion would be withdrawn directly from the traditional IRA balance in cases where the taxpayer doesn’t have sufficient cash on hand to pay the tax bill.
“That's not exactly the case,” Pistole said. “You need to take the income and then write a check. These may seem like nitpicky things, but the reality is that this is a serious topic, and mistakes can get you into real trouble with the IRS. We need to be accurate and exact about this stuff.”
Here are some additional highlights from our conversation, which also coincided with the 800th episode of Pistole’s long-running radio program and podcast Safe Money Radio. Appropriately enough, the guest was Ed Slott.
THINKADVISOR: Before we talk about Dave Ramsey, RMD ages and Roth conversions, I wanted to say congrats on 800 episodes of Safe Money Radio. How are you feeling about the milestone?
BRAD PISTOLE: Thanks for that. It really has been an interesting ride.
For the 800th episode, we ended up doing kind of a two-parter. For the first part, I was lucky enough to be able to host Ed Slott for a full 40- or 45-minute conversation about a variety of important retirement topics — including Roth conversions and RMDs. The second part will be coming out shortly after we are speaking.
What I can say at a higher level is that it’s been a real journey to get from zero to 800 episodes. When I first started, virtually nobody was doing radios or anything like podcasting. But I did find a decent audience pretty early on, and people really took notice of that. Now I think there are five different financial radio shows just here in the Ozarks region alone, so it’s really caught on and has become almost oversaturated over the years.
Having Ed on for the 800th episode was also really cool because we were able to reflect on the fact that it’s been a long time now since I took his IRA masters course — well over a decade. We were reflecting on the fact that back then, there was still an income limitation on Roth conversions. That's still the case for contributions, but the law for conversions changed in 2009 or 2010, and that opened up Roth conversions as a really powerful planning tool for wealth management clients.
As Ed discusses, he personally took that opportunity, as did I and many others, and the outcome has been amazing. The markets have quadrupled during that time, so it’s been an amazing amount of tax-free growth that people have been able to enjoy.
Finally, we also talked about Ed’s frequent point that taxes are so much more likely to go up in the future than they are to go down, with almost $40 trillion in federal debt. I really believe that, too, and that makes Roth accounts even more attractive for many people. You can lock in your tax rate today and you don’t have to worry about it.
I think you guys also talked about the role of annuities during the episode. What would you highlight?
PISTOLE: Yeah that’s right. Like me, Ed is also an advocate of annuities. He owns them. His parents owned them. I own them, and my parents owned them, too. As you and I have discussed, I’ve helped to place thousands of annuities over the years for my clients, and I’m a big fan of what they can do for people.
What’s been encouraging to see over the course of doing Safe Money Radio is that annuities’ reputation has been improving, even despite the effort by some gurus to totally discredit and denounce them.
A big part of that is the whole license to spend movement being driven by some fantastic researchers in our field — the likes of David Blanchett, Michael Finke, Wade Pfau, Jason Fichtner and others. As these folks show us, the math and science behind annuities don't lie. Annuities can play a powerful role in improving retirement security and the enjoyment of retirement, too.
Income is the outcome, as Jason likes to say.
That brings us to your recent LinkedIn post in which you criticize Dave Ramsey’s discussion about RMDs and Roth conversions. What drove you to write about that?
PISTOLE: It’s just a shame to see people with such a big audience getting such an important piece of information wrong, and his editors didn’t catch it either.
In a sense, you can say a year or a half year doesn’t matter that much, and the laws have changed as well, so you can't expect them to get everything right. OK, that may be true in some contexts, but not here. The IRS sees things very differently and they really care if you make a move a half a year early or a half a year late. It is a big deal.
I also take issue with his apparent suggestion that it’s not a big deal in terms of the overall plan to just make one big conversion and pay the taxes on the conversion from the income — rather than paying the taxes from cash on hand. The one-time conversion can make sense in some cases, but generally, I’m not a big fan of this approach. You’re cutting the legs out from under the strategy if you do this and taking a lot of the potential value off the table.
I know it’s not always going to be easy to accomplish, but it’s way better to have nonqualified assets on the side to pay the conversion taxes. That way the principle of the IRA gets straight into the Roth and starts the long-term tax free growth right away.
If you don’t have the cash on hand or if your income is already high, I like to advocate for clients making “many mini Roth conversions.” They should be working with the advisor and their tax professional to see how they can take full advantage of their current tax bracket. In many cases, dividing the conversion into thirds or fifths makes more sense. You can avoid triggering unintended tax consequences like IRMAA surcharges.
What other topics do you have in mind as 2025 draws to a close?
PISTOLE: I would just remind people that there are many tax moves that you can make that have a deadline of Dec. 31, not in April of next year. That’s true for a Roth conversion, for example. In fact, you should probably try and get anything time-sensitive done by a week before the end of the year, just to be safe in terms of getting the paperwork and reporting done.
Another one that comes to mind stems from a client conversation I just had. Sadly, this person’s wife died earlier this year. That means this is going to be the last year during which he can file a joint tax return, so it’s worth asking what the implications of that could be.
Finally, remember that, starting next year, higher earners are going to have to make any catch-up contributions to Roth-style accounts. It might be worth doing traditional catch-ups this year under the current framework for some clients.
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