Step by Step Series: When to Convert Your 401k to a Roth and When to Leave It Alone | Episode 20

Peter Thiel used a Roth account to turn a small investment in PayPal stock into $5 billion the IRS cannot touch. That is not a loophole. That is a strategy. And today Stephanie Dorsey breaks down exactly how Roth conversions work and how to use them to pay less tax over your lifetime.

This is Episode 20 of What the Wealthy Do, part of the How Does This Actually Work series. Every dollar in your traditional 401k or IRA will get taxed eventually. The question is not whether you pay. It is when and at what rate. A Roth conversion lets you choose to pay tax now at today's rate so that everything inside your Roth grows tax free forever and your heirs inherit it tax free too.

This episode covers why the wealthy convert even when they do not have to, including rising future tax rates, required minimum distributions at 73, and estate planning. Stephanie walks through a real case study showing how a 15-year conversion window saves a family from a brutal tax bill in retirement, covers the five best times to convert, and explains when you should absolutely not convert.

For entrepreneurs: the ROBS 401k Roth conversion strategy is also covered, the exact move Stephanie is personally executing at Margins Capital, where converting your business stock to a Roth while the valuation is still low could save you over a million dollars in taxes at exit.

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This podcast provides financial education and not financial advice.