Video Transcript Below
Introduction
00:00:00
Francisco Sirvent: Well, good morning everybody. Good morning. I guess it’s afternoon. Are we there yet? From what I can tell, we are. Let me get my screen going so that we can do this correctly. Right. All right. Just a second. All righty. I think we are good. Yes, things work.
Welcome and Introductions
00:08:03
Francisco Sirvent: Love it when the technology works. Good afternoon everybody, welcome. My name is Francisco Sirvent with Keystone Law Firm, Lifestyle Planning, and our Retirement Management Office.
Today we have a little bit of a more technical topic. We’re going to be diving into some pretty deep tax stuff. I’ll do my best to break it down and inch our way through this without overwhelming anybody.
Before we dive in, if you see settings on your screen that indicate this is being recorded, it’s because it is. We’re recording this for those who couldn’t attend live, and we’ll be sharing it on our YouTube channel publicly. So, look out for when that gets posted.
Thanks to my amazing team member, Alexis, we’ve gotten all of our prior webinars uploaded to our YouTube channel. If you want to watch any of those, you can go to YouTube.com/KeystoneLawFirm and you’ll see them under our long-form playlist.
Questions and Upcoming Webinar
00:09:21
Francisco Sirvent: All of them are there, available. You just go to YouTube, hit play, and it’s all right there for you to watch any of the topics we’ve done in the past. Same will be true with this one.
If you have questions, I’ll have some time for them as I go through this. I won’t have quite as much time as I normally do because I have a lot to cover, but I’ll make sure we get some in. Just so you know, since this is being recorded and shared publicly, please keep your questions as generic as possible. Don’t share private details about your own situation.
But feel free to interrupt with, “What did you mean by that?” while we’re going. I’ve got everyone’s microphones muted right now so we don’t pick up background noise. Toward the end, I’ll open the mics.
00:10:15
You can also pop questions into the chat anytime. At the end, you’ll be able to unmute and ask live.
The next webinar we’re doing is on September 30th. Don’t miss it. My partner, Michelle Dexter, will be talking about planning for beneficiaries with special needs—children, grandchildren, nieces, nephews, anyone you might want to include in your plan. There are a lot of unique rules about how to make sure they continue to get their benefits, even if you want to leave them money.
Michelle’s going to go over those on September 30th. Alexis will post the registration link in the chat before we sign off today.
00:11:17
You can just click there and register. Again, it’s completely free, open to anybody. If you know someone with a special needs child or beneficiary, send them the link so they can join too.
The Tax Problem with IRAs and 401(k)s
00:11:17
Francisco Sirvent: All right, let’s dig in. What are we talking about today? We’re talking about IRAs and 401(k)s specifically.
If you came to the last one with Carie Gutman, he talked about annuities and how to read your annuity statement. Some annuities are also IRAs, so that might overlap for you. But today we’re talking about the giant tax bomb that comes with an IRA.
So here’s the overview before I get into strategies. Your IRA—this was money you contributed while working. Every dollar you put into an IRA or 401(k) came off your taxable income in the year you contributed it.
00:12:31
As life goes on, you eventually hit something called an RMD—Required Minimum Distribution. That’s really what triggers most of the problems with IRAs.
I’ll just call them IRAs for simplicity, but 401(k)s follow the same rules.
RMDs kick in at age 73. Most people are forced to start taking withdrawals out of their IRA at that point.
Generally, you’ve invested it in stocks, mutual funds, ETFs—something to help it grow. Maybe an annuity. Either way, at age 73, you have to take out your first distribution, whether you want the money or not. If you don’t, there are big penalties.
That money you take out is fully taxable income in the year you withdraw it.
The Rising RMD Problem
00:13:51
Francisco Sirvent: Here’s the big problem. Let’s say from age 55 to 90, we look at income. You’re working, your income grows, and then you retire, so your income drops.
But at RMD age, 73, you’re forced to watch your income go up again—not because you’re earning, but because distributions keep increasing every year.
Those RMDs grow larger each year, no matter what. Even if all you have is Social Security, your taxable income will climb sharply because of these mandatory distributions.
00:15:05
If your account is growing faster than you’re withdrawing, your RMDs just keep getting bigger. That’s the tax problem.
And then it doubles at death. When you pass, those IRA assets must go to your beneficiaries. And whatever their taxable income is—usually at peak earning years—that’s where the distributions land.
So, your kids, 25–30 years younger than you, inherit this IRA while they’re still working, and now it just stacks on top of their income. Big tax problem.
Why Planning Matters
00:16:22
Francisco Sirvent: Some people tell me, “We don’t really need the money, so we’ll just let the IRA keep growing.” I hear that a lot.
I was just with a couple, 81 and 82 years old, who never touched theirs. They had other income sources. But now, their RMDs are $50,000–$80,000 a year. That’s a big amount of taxable income they don’t even need.
00:17:38
So, they’re asking, “Why are we being taxed on money we don’t use?”
At that age, there are fewer options. My hope is to catch some of you younger, so you have more planning opportunities.
Their IRA is really just going to be inherited, and all of their kids are still in high-earning years. So, it’s a really big tax problem, especially when nobody actually needs the money.
That’s why today I’ll go through six strategies. Not all apply to everyone, but usually one or two can make a huge difference. Some could even save hundreds of thousands in taxes if implemented early enough.
The Tax Bracket Window
00:19:59
Francisco Sirvent: Let me point out this timeline of income during retirement. Most people haven’t been shown this before.
There’s this little window between retiring and hitting RMD age. For some, maybe age 60 to 72. That’s a real opportunity window for tax planning.
00:21:14
So let’s talk about how taxes work. In the U.S., it’s a progressive tax system. Income is stacked into brackets. The first dollars are taxed low, and each extra layer gets taxed higher.
00:22:24
The big jumps are from 12% to 22%—almost double—and from 24% to 32%.
Managing which bracket you’re in is crucial. It impacts not only your income tax, but your capital gains rate and even Medicare premiums (IRMAA surcharges).
00:23:41
We had a client who unintentionally triggered extra income, which bumped them up a bracket and triggered Medicare surcharges. Painful mistake, but preventable if you forecast.
So, part of today’s strategies is making sure you don’t accidentally push yourself into higher brackets.
Strategy One: Roth Conversions
00:24:57
Francisco Sirvent: First strategy—and one of the simplest—is Roth conversions.
I’m still surprised how many people have never heard of this. Just last week, I spoke to an 83-year-old who had no idea.
00:26:05
Here’s how it works: Think of income in three buckets—taxable, tax-deferred, and tax-free.
Taxable: Wages, Social Security (partially), IRA distributions, bonuses, capital gains.
Tax-deferred: IRAs, 401(k)s—money you didn’t pay taxes on when you put it in, but you will when you pull it out.
Tax-free: Roth IRA distributions.
A Roth conversion moves money from tax-deferred into tax-free. But—when you do it, that amount counts as taxable income in the year you convert.
So, if you convert $100,000, that’s $100,000 added to your taxable income that year.
00:27:29
Why do it? Two main reasons:
Future higher tax rates. We expect tax rates to rise. By paying taxes now at today’s lower rates, you avoid higher future taxes.
Inheritance. If your kids inherit a traditional IRA, distributions are taxable to them, stacked on top of their income. If they inherit a Roth, distributions are tax-free.
00:29:52
Important: You cannot convert an inherited IRA into a Roth (except spousal cases). So if you want your heirs to benefit, you need to do the conversion yourself.
One technical note: a Roth IRA must be open for five years to qualify for the best tax treatment. Doesn’t mean you need to convert everything immediately—just open an account and maybe put in $1 to start that five-year clock. Then you can do larger conversions later.
00:32:20
So, first step: open a Roth IRA if you don’t already have one. Even a small conversion gets the clock started. Then, use that retirement window before RMDs to strategically convert portions while you’re in lower tax brackets.
Strategy Two: Qualified Charitable Distributions (QCDs)
00:32:20
Francisco Sirvent: Second strategy is called a Qualified Charitable Distribution—or QCD.
This only works if you’re already charitably inclined. It doesn’t put extra money in your pocket, but it prevents unnecessary taxes.
00:33:34
Here’s how it works: At RMD age, instead of writing checks to church or charity from your checking account, have the money go directly from your IRA.
For example, if you give $5,000 a year to charity and your RMD is $10,000, you can direct $5,000 from your IRA straight to charity. That $5,000 counts toward your RMD but does not count as taxable income to you.
00:34:44
Some of our clients do their entire RMD this way, because they don’t want the taxable income at all.
It reduces your reported income, which helps with tax brackets, capital gains thresholds, and Medicare premium surcharges.
00:36:03
Plus, with today’s higher standard deduction, many people don’t even get a tax benefit from charitable gifts written from checking accounts. A QCD restores that benefit in a sense, because it keeps the income off your return altogether.
One note: don’t wait until the end of the year. QCDs take time to process, and they must be completed in the same tax year to count.
00:37:01
If you have accounts spread across institutions, each one will send you an RMD statement. Add them up, figure your total RMD, then decide how much to give directly from the IRA.
So, that’s strategy two—QCDs.
00:38:08
Francisco Sirvent: Let me grab that question from the chat: Is it possible or advisable to pay for charitable donations from an IRA before you hit RMD age? Can you do QCDs before RMD age?
That’s a great question. I don’t know the exact answer off the top of my head, Laura, but I’ll look it up and email it out to everyone. What I do know is that QCDs must be made directly from the IRA to the charity—you can’t just take a distribution into your checking account and then donate it to claim the deduction. The QCD rules require the distribution to go straight from the IRA. But whether you can do them before RMD age—I’ll confirm and get back to you. Great question.
00:39:06
Francisco Sirvent: Let’s move into strategies three and four. Remember, taxable income is your Adjusted Gross Income (AGI) minus your standard deduction. These two strategies replace your standard deduction with larger, more powerful deductions.
The goal is to reduce your taxable income with deductions that are greater than the standard deduction. Examples include charitable giving and certain investments that qualify for tax-preferred treatment.
00:40:29
Francisco Sirvent: Here are two examples of these alternative deductions:
Solar Tax Credits
Energy Investments
These don’t fit everyone, but they can be very powerful.
Solar tax credits are unique because they’re not just deductions—they’re also credits. Deductions reduce your taxable income, but credits reduce your tax bill dollar-for-dollar. For example, if your tax bill is $5,000, a tax credit can directly wipe that out.
If you decide to invest in a solar project—say, a school, a church, or a commercial business installing a solar array—you invest alongside the solar developer. Once the project is completed, you receive a K-1 showing your tax deductions and credits. Some of the best solar investments return between 1.1 and 1.5 times your investment amount in tax benefits.
For example, if you’re doing a Roth conversion of $500,000, you’d normally owe about $200,000 in taxes. Instead of sending that to the IRS, you could put that money into a solar tax deal, offset the tax bill, and end up owning part of a solar investment. That way, your Roth conversion isn’t crushed by the tax hit.
00:45:16
Francisco Sirvent: The second option is energy investments. These are more speculative and risky, so they’re not for everyone. But they also come with large federal tax incentives because they support U.S. energy development—such as oil and gas reserves.
These investments aren’t credits like solar; they’re deductions. You invest in an oil and gas project, and you get deductions that reduce your taxable income. Businesses normally deduct things like equipment, but oil and gas projects also allow intangible drilling cost (IDC) deductions, which can offset ordinary income—including income from Roth conversions.
That’s powerful, because normally passive business deductions can’t offset your ordinary income. But with energy investments, they can. This means if you convert $100,000 to a Roth, triggering $25,000 in taxes, an energy investment could offset a big part of that bill—essentially letting you reinvest what you would have sent to the IRS.
Again, these are complex and risky, so you need to carefully vet the companies offering them. But some of our clients are using both solar credits and energy investments this year to reduce their tax bills.
00:49:54
Francisco Sirvent: Strategy five is something new: special types of annuities.
Some companies now offer Roth annuities that provide an upfront bonus. For example, if you convert $100,000 from your IRA, you’d normally owe about $25,000 in taxes, leaving you with $75,000. But with these special annuities, the bonus can make up for that tax hit, essentially restoring the balance to $100,000 inside the annuity.
Of course, annuities have rules and restrictions, so you need to understand those. But if they make sense for you, this can be a simple way to offset the conversion tax.
00:52:17
Francisco Sirvent: Strategy six is a Charitable Remainder Trust (CRT).
If you already have charitable intent, this is an elegant way to benefit both your beneficiaries and a charity. Instead of leaving your IRA directly to your heirs, you leave it to a CRT. The CRT then distributes income to your beneficiaries for up to 20 years—much longer than the 10 years required under current law. At the end of the term, the remainder goes to charity.
This spreads out the tax liability, often keeping beneficiaries in lower tax brackets, while also giving your estate a valuable deduction. The result is often more total wealth for both your heirs and the charity.
00:55:25
Francisco Sirvent: So, those are six strategies to consider. None of them are one-size-fits-all—they all require running the numbers and tailoring them to your situation.
I hate meeting with people in their 70s or 80s who say, “I wish I had known about these earlier.” If you have kids or grandkids approaching retirement age, share this information with them now.
Alright, let’s jump to Q&A.
00:56:34
Francisco Sirvent: Question: If I have stock in my IRA, can I keep it when I convert to a Roth?
Yes, you can keep the same investments when you do a Roth conversion. It’s called “journaling” the stock over. You’ll still owe the tax, but you can continue owning the same investments in the Roth.
Q&A Highlights:
Contributions vs. Conversions: Contributions to a Roth are limited ($7,000 annually, or $8,000 if over 50, with earned income). Conversions from a traditional IRA to Roth have no dollar limit.
QCD Limits: In 2025, the maximum qualified charitable distribution (QCD) is $108,000 for individuals, $216,000 for married couples. These must go directly from the IRA to the charity. You can begin at age 70½ (Francisco later confirmed).
CRT Setup: A CRT is separate from a revocable trust, and only receives IRA assets. It requires calculations to meet IRS rules, including a 10% net present value test.
01:04:00
Francisco Sirvent: That’s all the content I wanted to cover today. If you’d like to continue the conversation, I’m dropping my calendar link in the chat. It’s free—just a quick 15-minute call to brainstorm your situation.
If you don’t see a time that works, call or text my office and we’ll find one.
Also, keep an eye out for emails about our next webinar. Alexis will drop the registration link in the chat as well.
