You know, we’ve been getting tons of questions about Roth IRA conversions lately, so we decided we’d dedicate an entire show to the topic.

What is a Roth conversion?

• A Roth conversion means moving money from a Traditional IRA into a Roth IRA.

• A Traditional IRA is tax-deferred, meaning you likely received a tax deduction when you made contributions and will have to pay income taxes on withdrawals

• On the other hand, assets held inside a Roth IRA potentially grow tax-deferred, and any qualified distributions are tax-free. (BUT: You must be age 59½ and the earnings from the converted amounts must be the account for at least five years).

Who might benefit from a Roth conversion?

• Recent retirees who are no longer earning income

• Individuals who expect a large inheritance

• Individuals who are early in their careers and expect their earnings to increase in the future

• People who will take large Required Minimum Distributions (RMDs) from retirement accounts once they turn 72 or 73 (depending on their date of birth)

• Surviving spouses whose filing status changes to single, which often means paying a higher tax rate than when they filed married.

A big consideration for Roth conversions is that you’ll be paying income taxes on the amount converted.

On the upside, a conversion allows you to position those assets to grow tax-free over your lifetime, which may help you pursue long-term financial goals for your family.

Consult with a financial advisor or tax professional before you make any major decision regarding a Roth conversion.

All investing involves risk, but sometimes investors get up in technical definitions that miss the forest for the trees.

There is a more technical definition of risk: In financial terms, it’s the chance that an outcome or investment result will differ from an expected outcome or return

We would challenge much of this definition of risk. Risk is not falling short of a benchmark for six months, a year, or even a couple of years.

• Risk is falling short of your goals.

Defining risk is an important part of the financial planning process

• No two clients at our firm are alike. They have very different needs based on their individual circumstances and what they want to accomplish

- Many have worked hard, saved, and done well in the markets, and are looking for self-sustaining wealth

- Others want to get to the point where they have discretionary wealth — the ability to freely enjoy what they’ve accumulated

So, planning needs to begin with defining your goals and then wrapping a thoughtfully constructed investment strategy around a plan to increase the odds of success while minimizing potential risks.

• We defined risk tolerance at the top of the show (that is, the level of assumed risk that is comfortable for an investor). But there are nuances.

• Risk tolerance is the amount of risk that you must take in order to reach your personal goals, which are based on your unique situation. But this needs to be balanced against another concept: risk capacity.

• Risk capacity measures how much risk you can afford to take.

Four major external risks that you need to factor into your planning process:

• Longevity
• Inflation
• Market returns
• Tax policy

Bruce is out today. Peg asked a very special guest to help her present today’s topic, “Are Bond Ladders Back?”

Introducing Nicole Webb:

• Nicole leads our national wealth management teams focusing on high-net-worth families and their complex needs. She is a CERTIFIED FINANCIAL PLANNER™.

• 15+ years of financial services industry, with experience in the asset management, institutional, and family office sides of the business

• She’s served as an active member of several WEG boards, including the investment committee, product committee, and the advisory council

• Has appeared on CNBC, Fox Business, and Bloomberg TV and Radio.

• Quoted in The Wall Street Journal and The New York Times

• Nicole has a BS in Business from the University of St. Thomas, is a CERTIFIED FINANCIAL PLANNER™, and also a 2015-2019 and 2022 winner of the “FIVE STAR Wealth Manager” designation from the Minneapolis-St. Paul Magazine and the Twin Cities Business magazine.

• Nicole is also Peg's daughter! We're delighted to have her on today’s program.

Let’s start with some basic definitions of what a bond is and how it might be used in a portfolio.

• Interest rates have risen, boosting your investments in savings accounts, certificates of deposit (CDs), and money market funds

• Meanwhile, stocks have become more volatile as the economy slows and the risk of recession increases. This can be especially concerning to folks who are nearing retirement or are in retirement and need to generate predictable income.

• Along with CDs, bonds have moved back into the limelight, as their prices generally rise and fall with changes in interest rates (as available market yields rise, bond prices fall and vice versa)

What is a bond ladder exactly? Why consider one now?

• A bond ladder is a useful strategy to consider when interest rates go up.

• Simple definition of bond ladder: a portfolio of bonds that mature on different dates.

• Building a bond portfolio with different maturities can generate income while minimizing your exposure to interest-rate fluctuations

How it works:

- You invest in bonds with different maturities and different yields.

- When shorter-term bonds mature, you can reinvest the returned principal in new bonds with longer-term maturities.

- If rates rise, you can take advantage of the higher yields.

- But if rates go down (which some economists are now predicting could happen), you’re still invested in other bonds with higher fixed rates of return.

How interest rate increases can affect your financial plan

• Changes in the economy can have potentially far-reaching effects on your overall financial plan—or they can have minimal impact.

• Every situation is different, so what may be good for your neighbor may not be good for you.

• That said, periods of sustained higher interest rates can be a great time to reevaluate your portfolio and your allocation of bonds versus stocks.

• Having the additional exposure to bonds as yields go higher can provide a better balance of risk in your portfolio; creating a bond ladder could be an effective strategy to lock in more sustainable income for your retirement.

You know, Bruce and I have the most fun on this show when we go off script and take questions from our Your Money Radio Show listeners. So we’ve decided to make today’s program an “Open Lines” show.

Replacing income once you stop collecting a regular paycheck is one of the most challenging problems in finance. Here’s one strategy to consider.

Bruce is out today and today Peg will be joined by one of my team members Senior Vice President and Financial Advisor, Preston Koenig.

Introducing Preston:

• Preston has served institutions and families in the financial services industry since 2006

• He earned his CFP® designation and his MBA from Metropolitan State University

• He believes that everyone should have access to comprehensive, customized, objective financial advice.

• Preston works along with the Roundtable™ to tailor expert advice for each client by integrating their life goals with personal finance.

What are the key risk factors that you need to consider when generating income that will last over your lifetime?

- Longevity

- Inflation

- Changing public policy

- Withdrawal rate

• It's important to keep in mind that spending does not move in a straight line in retirement
• Start with your vision for what your retirement could look like

- Do you have a view of what retirement income might look like?

The bucket approach using Your Money matrix

Short-term bucket: Income (1 to 3 years of cash flow) = $200,000

Medium-term bucket: Buffer (4 to 9 years) = $300,000

Long-term bucket: Growth (10+ years) = $500,000

Tax diversification is important

• Taxable accounts: Brokerage and other liquid accounts with gains taxed at year-end.

• Tax-deferred investment accounts: No tax today, but distributions are taxed as ordinary income.
• Tax-advantaged investment accounts: No tax deduction on contributions, but withdrawals can be tax-free

On today’s show we’re talking about five forms of insurance that are important to have – or if you don’t have them, you should know why you don’t. Joining us is a special guest from the Wealth Enhancement Group’s Roundtable, Jennie Boland. Jennie is an expert in applying life insurance strategies to our client’s financial plans across the organization.

Sadly, too few Americans understand how to create a budget, manage a credit card, or save and invest for a major goals such as a first home or retirement. For example, a recent survey of adults showed that they could only answer 50% of 28 basic money questions. Increase your financial literacy by listening to this episode with Bruce Helmer, Co-Founder and financial advisor at Wealth Enhancement Group and Nicole Webb, CFP® senior vice president and financial advisor at Wealth Enhancement Group.

Many pre-retirees fail to recognize the impact of taxes on their retirement strategy. Whether you’re a young person just starting your career, or a seasoned professional nearing retirement, developing a tax-savvy strategy today can save you from painful surprises down the road. Tune in to this episode to hear Bruce and Peg share their top tips for developing a tax-savvy strategy.

Struggling to manage your financial chores? Or even to know where to begin? Use our handy quarterly calendar to get on track!