Editor’s Note :
Taxes shape more than returns—they affect retirement, assets, and family legacy.
Cultural Weekly launches a new Tax & Finance column featuring James Wang, former President of the North American Chinese Association of CPAs.
He offers practical insights to help readers avoid risks, protect wealth, and plan ahead.
Former President of the North American Chinese Accountants Association, James Wang, recently saw a YouTube topic: “Converting a Traditional IRA to a Roth IRA at 70.”
His reaction: 70 is not too late—but waiting that long may mean missing a more flexible planning window.
Wang said many clients hesitate when they hear, “You must pay taxes now.” No one likes taxes, but taxable income makes them unavoidable.
Retirement funds left to heirs may also carry income taxes and withdrawal deadlines.
Defer Taxes—Count Costs
Many people reduce current taxable income through deductible Traditional IRA contributions and pre-tax contributions to 401(k) and 403(b) plans.
These accounts help build retirement wealth, but “deduct now, pay later” still carries a cost.
Withdrawals of untaxed contributions and earnings are generally taxable. At the required age, account owners must also begin RMDs.
The added income may trigger IRMAA and raise Medicare Part B and Part D premiums.
Wang believes people in their 20s and 30s face major life changes—education, career moves, marriage, children, and homeownership—and should avoid locking too much money into one retirement strategy.
He still encourages early saving, especially when an employer match is available, while maintaining emergency reserves and financial flexibility.
Wang views ages 59½ to 60 as an important time to review retirement accounts and tax strategies. After 59½, most retirement withdrawals avoid the 10% early-withdrawal penalty, although income taxes may still apply.
When changing jobs, an old 401(k) can usually be rolled directly into a Traditional IRA tax-deferred.
Moving pre-tax funds into a Roth IRA generally makes them taxable that year. This is a Roth conversion or rollover—not a Backdoor Roth.
Convert Gradually—Gain Flexibility
James Wang favors Roth IRAs for their tax-free growth, qualified tax-free withdrawals, and freedom from lifetime RMDs for the original owner.
Roth conversions have no income limit or minimum age. A favorable window often comes after earned income drops but before Social Security and RMDs begin.
Partial annual conversions mean paying taxes now, but they may reduce future taxable withdrawals and RMDs.
Know the Ages—Plan the Taxes
Social Security can begin at 62. For someone whose full retirement age is 67, benefits are about 70% at 62 and about 124% at 70, with no further increase after age 70.
Medicare generally begins at 65. Because IRMAA usually uses modified adjusted gross income from two years earlier, large Roth conversions around age 63 should be carefully planned to avoid higher Part B and Part D premiums.
RMDs begin at 73 for those born from 1951 through 1958 and at 75 for those born in 1960 or later. Those born in 1959 should confirm the latest IRS guidance.
Reducing pre-tax balances may lower future RMDs, but the current year’s RMD cannot be converted to a Roth.
Run the Numbers—Then Convert
James Wang advises asking four questions before a Roth conversion: Is income lower this year? Will the conversion raise the tax bracket or IRMAA in two years? Is outside cash available to pay the tax?
After careful analysis, smaller annual conversions are often safer than converting everything at once.
He notes that direct Roth IRA contributions have income and annual limits. A Backdoor Roth lets high earners make a nondeductible Traditional IRA contribution, then convert it to Roth.
Untaxed funds are taxable upon conversion; after-tax contributions generally are not. Form 8606 and the pro-rata rule may apply.
Wang concludes: Traditional accounts defer taxes; Roth accounts pay taxes now for future tax-free flexibility.
Neither is always best—the right plan balances taxes, Medicare premiums, cash flow, and estate goals.
Note:
RMD: The required minimum annual withdrawal.
IRMAA: An income-based surcharge on Medicare Part B and Part D premiums.
** This reflects James Wang personal planning approach. Individual results vary by income, family, health, and assets, so careful analysis is essential.
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