Divorce the IRS

Welcome to Divorce the IRS, the Retirement Income Planning Podcast—built for people who want to pay the least amount of taxes possible and create retirement income that actually lasts. Inspired by Jimmy Miller’s bestselling book Divorce the IRS, this show takes you behind the scenes of the tax rules, retirement strategies, and planning decisions that can quietly determine how much of your money you keep.

The truth is, taxes aren’t just “something you deal with later.” The U.S. tax code is massive, confusing by design, and full of traps that can hit hardest right when you need your money most. From 401(k)s and IRAs to Social Security and Medicare, many common “smart moves” can turn into expensive surprises—like required minimum distributions, Medicare surcharges, the widow’s penalty, and other retirement tax time bombs most people don’t see coming until it’s too late.

With 20+ years of experience as a global wealth manager, Jimmy breaks these topics down in a clear, practical way—so you can plan proactively, avoid unnecessary taxes, and build a retirement where your delayed gratification finally pays off. Subscribe so you never miss an episode, and remember: this podcast is for general education only and isn’t legal, tax, or investment advice—always consult a qualified professional for guidance specific to your situation.

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Divorce the IRS

The Roth Conversion

May 28, 2026 • James Miller

0:00 | 8:59

LISTEN TO THE IDEAL NUMBER EPISODE:
https://www.buzzsprout.com/2565788/episodes/19096145

CALCULATE YOUR IDEAL NUMBER:
https://baobabwealth.com/ideal-number/

One of the biggest questions in retirement tax planning is whether it makes sense to pay taxes now instead of later.

For many people, the answer may be yes.

In this episode of The Divorce the IRS Podcast, we break down Roth conversions and why they can be a powerful strategy for moving money from tax-deferred accounts into tax-free Roth accounts.

A Roth conversion allows you to shift some or all of your pre-tax retirement money into a Roth account. While this creates a tax bill in the year of the conversion, it may also help reduce future taxes and create more tax-free retirement income.

We explain why Roth conversions are sometimes described as “refinancing your IRA” and how this strategy can help investors lock in today’s tax rates instead of waiting to see what tax rates may look like later in retirement.

You’ll learn why paying taxes on retirement money today may be more attractive than paying taxes later on a much larger account balance, especially if your pre-tax accounts continue to grow over time.

We also discuss important rules and planning considerations, including the five-year rule for Roth conversions, the 10% early withdrawal penalty, why you should generally avoid using converted retirement funds to pay the tax bill, and why Roth conversions can no longer be undone through recharacterization.

If your goal is to build more tax-free retirement income, reduce future required minimum distributions, and create greater long-term tax flexibility, Roth conversions may be an important strategy to understand.

In This Episode

• What a Roth conversion is
• How Roth conversions move money from tax-deferred to tax-free accounts
• Why Roth conversions are sometimes called “refinancing your IRA”
• Why current tax rates matter in retirement planning
• How future account growth can increase future tax exposure
• Why you may not be in a lower tax bracket in retirement
• How to strategically convert only the amount that makes sense
• Why you should be careful about pushing into a higher marginal tax bracket
• Why paying the tax bill from outside funds may be important
• How the 10% early withdrawal penalty can affect younger investors
• How the Roth conversion five-year rule works
• Why Roth conversions are permanent and cannot be undone
• How Roth conversions may affect Social Security taxation, Medicare premiums, RMDs, surviving spouses, and heirs

What’s Coming Next

• Lesser-known strategies for early retirement planning
• Ways to create tax money for Roth conversions
• More tax-free retirement income strategies
• Advanced planning concepts for reducing future retirement taxes

SPEAKER_00 0:01

Welcome to the Divorce the IRS Podcast, the retirement income planning podcast designed specifically for those who want to pay the least amount of taxes possible and build a retirement income that lasts. Inspired by the best-selling book, Divorce the IRS, you get to go behind the scenes with financial planner, author, and speaker Jimmy Miller. Learn how to set yourself up to pay the least amount of taxes in retirement when you'll need your money the most. And now, here's your host, Jimmy Miller.

SPEAKER_01 0:27

Welcome. Welcome to episode 22 of the Divorce IRS Podcast. In today's episode, we're going to explore yet another way that you can get more money into Roth accounts using the Roth Conversion. Let's dive right in. The Roth Conversion, what I like to call refinancing your IRA, provides another underutilized opportunity. This is a simple way to shift dollars from the tax me later bucket to the tax me never bucket. It's done by simply moving, called converting, some or all of the money in a tax-deferred account into a Roth account. Now this creates a tax liability that year on all the dollars you shift, so the strategy must be considered carefully. However, once converted, the money and its growth should never be taxed again. With the historically low tax rates we are currently experiencing, it's worth determining if this strategy is right for you. This is akin to locking in the current and historically low tax rates on your pre-tax money now, and then never having to worry about it again. As a financial advisor, I find it surprising that people are so reluctant to lock in the current historically low tax rate on their IRA and other pre-tax money and move forward tax free, especially when they are so keen to do this with mortgages, which is basically the same idea. And they're happy to pay lots of fees to lock in the rate for a mortgage for the next 30 years. Remember, every time you earn a dollar in your pre-tax accounts, the whole dollar isn't yours. It's going to be split with the IRS at some point in the future when you withdraw it. And at whatever tax rate the IRS imposes on you at that future time. If your money earns a dollar in your Roth account, the whole dollar is yours and is never going to be split in retirement with the IRS. Plus, would it be better to pay tax on the value of your IRA now rather than in the future once it's doubled or maybe quadrupled in value and pay taxes on that much bigger balance? It doesn't take a rocket scientist to understand that paying taxes now on, say, $100,000 is better than paying taxes later when the money has grown to $300,000 or $400,000. Even if you believe you'll be in a lower tax bracket one day when you take the money out, which you probably won't, and can explore why by going back to the episode entitled The Myth of the Lower Tax Bracket, you are still going to ultimately pay more tax dollars when taking out $400,000 than you would by paying taxes now on $100,000. It doesn't matter how much lower you think your tax bracket will be in retirement. It isn't going to be low enough to actually save you any dollars. Now luckily, you can convert just the amounts you'd like into a Roth IRA. This allows you to strategically plan with precision what's best for you to shift between buckets and pay taxes on each year. You likely don't want to push yourself into a higher marginal tax bracket with your conversion, but maximizing your current bracket can make a lot of sense, especially if your financial plan shows that you will never be in a lower marginal tax bracket than you are in now, which a lot of plans do show actually. Now, if you choose to convert to a Roth IRA and you're younger than 59 and a half, make sure you have the money available to pay the tax bill. Allowing the account to pay the tax bill for you will result in the 10% early withdrawal penalty being levied on the amount withdrawn. This penalty, which is tax time bomb two, negates the benefits of the conversion in most cases. Plus, you want to end up with as much money in the Roth account as possible. And paying the tax from the account decreases the amount you will end up with in your Roth account. It's also important to understand that the government has imposed the five-year rule on Roth conversions to prevent people from converting an IRA to a Roth and then immediately withdrawing their money, thus sidestepping the 10% early withdrawal penalty. This five-year rule is different from the one discussed earlier, where you must have owned a Roth account for at least five years to take the growth out tax-free. This rule simply states that any money converted to a Roth IRA needs to stay in the Roth account for five years to qualify for penalty-free distributions. This time period begins on January 1st of the year you convert. However, if you're over 59 and a half years old, this rule doesn't affect you. You should also know that Roth conversions are permanent. It used to be that if you changed your mind before the next tax deadline on a Roth conversion, you could do something called a recharacterization of the conversion and basically undo the Roth conversion. This was handy and allowed people to convert to a Roth and then see how their income and financial plan turned out for the year. And if they needed to, they could get out of the Roth conversion with the recharacterization and avoid the conversion taxes as well. Nowadays, you can't recharacterize. I understand that no one wants to purposefully pay more tax in a current year than necessary, and that Roth conversions and the tax they create can feel painful. Americans love to put any problem they can off till later. But remember, you're going to pay the tax on this money. It's only a matter of when you pay the tax. Best to pay the tax on your terms within the context of your financial plan and not be subject to even more tax later in life. A time when you need your money the most in retirement. Remember, it isn't like you're kicking the tax can down the road. It's more like you're rolling the wet tax snowball down a wet, snowy slope. You can also think about it like ripping the band-aid off quickly now, or slowly pulling a much larger and more sticky band-aid off very slowly over the course of your entire retirement later in life. Now don't forget to consider the other tax time bombs as well when deciding whether or not a Roth conversion is right for you. The issue here isn't just about paying tax now or what your tax rate is now compared to what it might be in retirement. It's also about triggering extra taxes on your Social Security, paying more for your Medicare, your required minimum distributions one day, putting your surviving spouse in a bad financial situation with the widow or widower's penalty, and finally paying even more taxes from the grave, as your kids will have to then pay all the taxes on your pre-tax accounts. Roth conversions can make a lot of sense. And if you haven't figured out your ideal number, the amount you should have today in pre-tax accounts, go do that. Listen to the episode about that, then watch the video. And go use the free calculator on www.divorce-the-irs.com to calculate your ideal number. Once you have done that, consider Roth conversions if you already have too much money in your pre-tax accounts, as most people do. Now that's it for this episode. I hope you're really starting to understand all of the options you have to save on future taxes at this point and how important that future is for you. In the next episodes, we're going to explore some even lesser known strategies that people can use to retire early or come up with the tax money they need now for Roth conversions within their financial plan.

SPEAKER_00 8:20

So stay tuned.com or the Bayabwealth website at bayablewealth.com and subscribe to the blog to stay up to date on issues affecting retirement income planning. Don't forget to subscribe to the podcast so you never miss an episode. Bayob Wealth and Bayabut Wealth Abroad are DBAs of Bayob Wealth LLC, a Florida registered investment advisor. This podcast is designed for general education purposes only and shouldn't be taken as legal investment or tax advice. You should seek out a qualified tax professional or licensed financial advisor to determine what is best for your personal situation.