In this episode of Protecting and Preserving Wealth, we talk about how market volatility can create planning opportunities, especially through in-kind Roth IRA conversions. The focus is on using market dips to move investments from a traditional IRA into a Roth IRA at a temporarily lower value. The goal is to reduce the taxable amount of the conversion while allowing the rebound to happen inside the Roth, where future growth may be tax-free.

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⏱️ Chapters & Timestamps

Bruce explains the strategy with a simple example. If a stock like Nvidia is held in an IRA and drops 10%, the shares can be transferred directly into a Roth IRA without being sold. That is the in-kind conversion. If the investment was worth $100,000 before the dip and falls to $90,000, only $90,000 is recognized for tax purposes when it is converted. If it later recovers to $100,000 inside the Roth, that $10,000 recovery happens in the tax-free account. Bruce describes this as a $20,000 tax-free move because the client avoids converting at the higher value and captures the recovery inside the Roth.

Alex adds that market dips are common. Historically, the S&P 500 has averaged a drawdown of about 14% to 15% in a year. That does not mean a dip is guaranteed every year, but it does mean investors can prepare for those opportunities. The assets that tend to work best for this strategy are growth-oriented investments, such as stocks, ETFs, and mutual funds. These are the assets that usually experience more volatility and may have more room to recover after a decline.

Bruce also explains that preparation matters. Clients who are old enough to take required minimum distributions must take their RMD before doing a Roth conversion. He recommends getting RMDs done early in the year so the conversion opportunity is not delayed. A tax plan should also be completed in advance so the client knows how much they want to convert without creating unwanted tax issues, higher brackets, or IRMAA penalties.

The conversation also covers what Bruce calls the “November list.” This is a strategy for paying taxes later in the year through IRA withholding. Instead of making estimated payments earlier, some clients wait until November and have taxes withheld from an IRA distribution. Bruce says the IRS treats that withholding as if it had been paid evenly throughout the year. This allows the funds to remain invested longer before the tax payment is made.

Alex notes that Roth conversions can be useful not only for retirement planning but also for legacy planning. Roth accounts may benefit spouses and heirs because the growth can be tax-free. He also points out that conversions do not always need to be large. Smaller strategic conversions during market dips can add up over time.

Bruce closes by explaining that many advisors wait until the end of the year to decide on Roth conversions. Hosler Wealth Management takes a more proactive approach by planning ahead, identifying the conversion amount, and being ready when a market dip occurs. The episode emphasizes that while no one can perfectly time the market, being prepared can make volatility work in a client’s favor.

For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management: Visit us online at https://www.hoslerwm.com/

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