Roth Conversions Explained: November Sweet Spot & Critical Rules

⏰ Roth Conversion Deep Dive – In this 3.5-minute video, Tony Leonardi, CFP® from Newtown, CT, explains why November is the ideal time for Roth conversions and—critically—the aggregation and pro-rata rules you MUST understand first.
VIDEO CHAPTERS: 0:00 - Introduction: Why November? 0:40 - The Bracket Management Strategy 1:20 - Real Example: $88,200 Conversion 2:00 - CRITICAL: Aggregation & Pro-Rata Rules 2:45 - Who Benefits Most 3:00 - Action Steps & Warnings
Why November Is the Sweet Spot:
The Problem with Earlier Conversions: In January-March, you don't know your full-year income yet. Bonuses, capital gains, unexpected income can push you into higher brackets.
The November Advantage: By November, you know:
• Your W-2 income (largely set)
• Your bonuses (announced)
• Your investment income (mostly realized)
• Your capital gains (from sales)
This lets you calculate EXACTLY how much room you have in your current tax bracket before jumping to the next.
The Strategy:
Step 1: Calculate 2025 Taxable Income Start with expected AGI, subtract standard deduction ($31,500 married / $15,750 single)
Step 2: Identify Your Bracket Space Example for 22% bracket (married filing jointly):
• Bracket extends to: $206,700
• Your current taxable income: $118,500
• Space remaining: $88,200
Step 3: Convert Up to That Amount Convert $88,200 from traditional IRA → Roth IRA
• Pay 22% tax now: $19,404
• Avoid 32% tax later: potential savings of $8,820 on this amount alone
Real Example from Episode:
Couple's Situation:
• Combined income: $150,000
• Standard deduction: $31,500
• Taxable income: $118,500
• Tax bracket: 22% (up to $206,700)
• Room left in bracket: $88,200
The Conversion: They convert $88,200 from traditional IRA to Roth IRA in November.
Immediate Cost: $19,404 in taxes (22% × $88,200)
Long-Term Benefit:
• That money now grows tax-free forever
• No RMDs required on Roth IRAs
• Withdrawals in retirement are tax-free
• If RMDs would have pushed them into 32% bracket, they save 10% on this money
The Math:
• Pay 22% now: $19,404
• Avoid 32% later: would have been $28,224
• Net savings: $8,820 (plus all future growth is tax-free)
CRITICAL COMPLIANCE CONSIDERATIONS:
⚠️ This Is NOT Simple - You MUST Understand These Rules:
1. IRS Aggregation Rule The IRS treats ALL your traditional IRAs as one combined account for tax purposes.
You CANNOT:
• Pick and choose which IRA to convert from
• Convert only "clean" money and leave basis behind
2. Pro-Rata Rule If you have BOTH pre-tax and after-tax contributions across multiple traditional IRAs, every conversion includes a proportionate share of BOTH.

Once done, you're committed even if:
• Market tanks and your converted amount drops in value
• Your income unexpectedly increases
• Tax laws change unfavorably
• You change your mind
4. Five-Year Rules Multiple five-year rules apply:
• Must wait 5 years (or until 59½) to withdraw converted principal penalty-free
• Each conversion has its own 5-year clock
• Withdrawals come out in order: contributions first, then conversions (oldest first), then earnings
5. Impact on Other Financial Factors
Medicare IRMAA: Large conversions increase MAGI, potentially triggering higher Part B/D premiums two years later. Thresholds for 2025:
• Single: $103,000
• Married: $206,000

❌ People Near Medicare IRMAA Thresholds Conversions could trigger $4,000+ in higher premiums.
❌ Those Needing Money Soon Five-year rule could trigger penalties on early withdrawals.
❌ People with After-Tax IRA Basis Pro-rata rule makes conversions less efficient.
❌ Those in Unstable Financial Situations Can't reverse if circumstances change.

The Bottom Line:
Roth conversions can be incredibly powerful for the right person in the right situation. But they're NOT a one-size-fits-all strategy.
The combination of aggregation rules, pro-rata rules, irrevocability, and potential Medicare impacts means you MUST work with qualified professionals before proceeding.
November gives you the information you need to make an informed decision. Don't rush. Model it carefully. Understand ALL the implications.
Resources: 📊 Roth Conversion Analysis: LeonardiFamilyWealthcare.com/assessment 📖 Book: A Smarter Way to Retire: 10 Steps Towards a Confident Financial Future 📱 Follow: @TonyLeonardiCFP (Instagram) | Leonardi Family Wealthcare (Facebook) 🎧 Full Year-End Tax Episode: Listen on Spotify | Apple Podcasts
Compliance Note: Roth conversion scenarios are for educational purposes only. IRS aggregation and pro-rata rules apply to multiple IRAs with mixed pre-tax and after-tax contributions. Conversions are irrevocable. May affect Medicare premiums, tax brackets, and other financial factors. Consult with your CFP®, CPA, and potentially estate attorney before implementing any strategy. Individual results vary based on specific circumstances.
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