Craig Wear explains how converting traditional IRAs to Roths now can create tax-free money for future long-term care costs. Nursing home stays average 2-3 years at median monthly costs around $8,000 to $10,000. Model your own needs and talk to a CFP about whether conversion makes sense for you.
Well, hey there, welcome back. This is Craig. Look, did you know that strategic financial planning today could possibly have a significant way of alleviating future burden of long term care costs tomorrow? And there are a lot of ways of doing that. But today I want to explore how coordinating Roth conversions can maybe be a game changer for you and for your family. You know, the statistics around long term care and nursing homes is has been pretty consistent throughout the years. The average age that most individual enter an assisted living or nursing home is in their mid-80s. The average being around age 84 according to caring.com and the median stay, meaning what happens most frequently in an assisted living facility is around 22 months while nursing homes the average stay is just 13, almost 14 months. And that's stat that was put out by retirement living. But the costs are just crazy. Nationwide assisted living costs the the median monthly cost is just under $4,800 according to Forbes. You go to a nursing home for a semi private room. The national median monthly costs about $9,200 and for a private room for nursing home stays a little over $10,000 according to senior site. So I'm going to suggest that you start with a little bit of solid financial planning projections. So what are the resources that you have, what are you going to need for all the other things in your life and then kind of figure out what's going to be left. And a lot of the people that we work with and do help with Roth conversions, they're coming to us because they're thinking I'm really not going to need this IRA money, so let's just get converted and save the taxes, which that's a great benefit. But look, once you decide and you figure out quantitatively through doing the math that you're probably not going to need all of your IRA for living expenses, that then you kind of got to figure out, look, if you don't already have insurance to cover long term care, or maybe you have insurance and you're looking for a way to get out of the premiums, or maybe you're planning on self insuring your long term care or home health care or nursing home stays, you're going to want to first figure out what the cost might be. And once you know what that cost is going to be and you continue to inflate that over time, now you can incorporate your Roth conversions of that large IRA as just one more reason why conversions make a lot of sense outside of just the enormous tax savings that you get from doing the conversion. So what I'm kind of just trying to pique your interest into thinking, well, maybe I can pigeonhole this amount of money over here toward long term care or health insurance premiums or nursing homestay for me and or my spouse. Think about that from a Roth standpoint. So, you know, by converting the IRA to a Roth and maybe pigeonholing some of that Roth, your investments are going to grow tax free and that's going to allow you to withdraw funds later without tax complications or implications. When someone is covering long term care expenses for you, oftentimes it's the remaining spouse or its family members. And you know that the timing when you have to go through that is already emotionally challenging. So having the money tax free means that your family won't have to face that additional tax burden while managing their care responsibilities for you. So what we're really trying to get to is kind of a more predictable financial planning scenario. So with your tax free withdrawals that come from your Roth ira, you can a lot more accurately plan for what your future expenses are going to be because you know that the amount you withdraw is the amount you can use. You don't have to pay taxes on it in addition to that and you don't have to worry about your heirs or your caregivers. Don't have to worry about how much can I pull out before I hit another tax bracket and cost a lot more tax. So, you know, I talk all the time about why to consider Roth conversions now, the current tax environment, I mean, we got historic low tax rates and converting now locks in those current rates and potentially going to save you money in the long run. Because you do it now, the timing on those needs to be fairly strategic. And the old adage of the old advice that just says go to the top of your current tax bracket, stop if you're an IRA millionaire is probably really bad advice. What we've discovered is if you are that IRA millionaire, you need to convert aggressively over a period of several years at probably a higher tax bracket than what you currently can imagine. By doing that, it can minimize the overall lifelong tax impact of that whole conversion process. One of the things that I really want you to think about is how do I incorporate my Roth conversion where it's maybe not just a big pot of money sitting there, but maybe I think about it in terms of, well, here's the amount of money that we're going to set aside here. It's going to be in the Roth, and if we need assisted living or nursing home care, then we are our caregivers can be there or my spouse can be there to take care of that. But you got to understand that costs very greatly by state and I've prepared a very comprehensive summary that gives you the most recent long term care costs across the country. It's a resource, I think, that can assist you a little bit in making some informed decisions based on the location that you're at. So somewhere down below this though, in the notes or something will be some instruction how to download your copy for free. It's just a one or two page thing and we try to just give you an idea that there is a big variability and give you some resources you can go out and look at as well. So if you're in your 50s, your 60s, or your 70s, now is really the time to consider how Roth conversions can fit into your long term care planning. Taking action today can provide a lot of financial peace of mind for you and your loved ones in the years to come. And if you'd like some professional help to help you decide how much money should we set aside and how do we get it converted and what's the best way to get it converted and how does it fit into our overall financial plan? Schedule a free initial consult with one of our CFPs and see if they can shed any light into it. And if we be of any service to help you kind of figure out what's best for you, then of course that's what we're here for is Roth conversion advice plus financial planning advice as well. So hope this has been of help to you and somebody this might apply to. Pass it on to them. Hit the like button and let us know that you like this kind of stuff. And hey, if you have not already subscribed to the channel you like this kind of stuff, click the subscribe button and you'll be notified the next time we come up with something that may be helpful to you. Take care, have a great day. God bless.
