June 8th, 2024 In-Person Chapter Meeting & Webinar

Family Mortgages, and
the Latest in Roth Conversions

Announcements:

• Our speaker has agreed to have lunch with us at a local restaurant following the meeting.  Please consider joining us.
• We are preparing to launch a new discussion group that will meet over a meal. Please email [email protected] to sign up.
• We are also preparing to launch a new Personal Finance Special Interest Group (SIG), to be co-led by our speaker this month. Please email [email protected] to sign up.

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Fellow chapter member John Williams will give a two part presentation on Intra-Family Mortgages and the latest research on Roth IRA conversions.

Part 1: The Intra-Family Mortgage

With high housing prices, interest rates above 7%, and required down payments, it can be difficult for a young person to afford to purchase a home. Those of means may want to help a young family member with a home purchase, but they may not want to give large gifts of cash or property. A “Family Mortgage” can be a solution that provides many other benefits.

Based on his recent experience using National Family Mortgage, John will address

• how Family Mortgages work and their significant benefits
• minimum interest rates to avoid problems with the IRS
• how both parties can be protected through legal contracts, property liens, and foreclosure rights
• other risks and concerns, including relationships, and how these can be mitigated

Part 2: Roth IRA Conversions

We will briefly review basic Roth conversions, and some scenarios where they may pay off, and some where they may not. We will briefly identify some retiree tax situations where the marginal tax rate is higher than the tax bracket rate, which is key to understanding the tax rate for future Required Minimum Distributions (RMDs).

We will introduce a fairly recent and not well-known academic paper from Edward McQuarrie and James Dilellio titled “The Arithmetic of Roth Conversions,” which extends beyond conventional wisdom about whether and when a Roth conversion may pay off. McQuarrie’s innovation is using a more realistic set of assumptions, and surprisingly identifies scenarios where a conversion tax rate even as high as 8% higher than the tax-deferred account distribution (RMD) rate can pay off, though it will take many years.

McQuarrie has introduced a spreadsheet that quantifies the age and amounts for which Roth conversions pay off. Some adaptations to the spreadsheet made by today’s speaker extend the Roth conversions scenarios beyond those of Professor McQuarrie, and you can do this at home to model your situation. This work can be a game changer for successful Roth conversions for scenarios they may not have thought possible.

Meeting Details:

Date: Saturday, June 8, 2024

Time: 10:00 a.m. ET (mix and mingle starts at 9:30)

Location: Barwell Road Community Center: 5857 Barwell Park Drive Raleigh, NC 27610

Virtual access: To register to attend the Zoom webinar, please purchase a ticket on our chapter’s Square account

Cost: $7 cash (in-person) or electronic payment (webinar)

Before attending in person, please read:

• the AAII Protocol for In-Person Meetings

If you feel sick, please join us virtually.

About Our Speaker

John Williams has been an AAII member since 2001 and lifetime since 2003 who has had a long passion for finance and investing.   Retired for 4.5 years, after a 40+ year career as a software engineer at Cisco Systems and Siemens, he has been engaged with a Cisco investor forum with hundreds of members for over a decade. John has some personal experience with the topics for this meeting, and besides presenting his very happy and successful mortgage experience, will present some intriguing fairly new research on Roth conversions.

Having a local AAII member present is a bit of a new direction, so hopefully this will provide an opportunity for a fresh outlook and different perspectives other than the usual fare. John is expected to be a co-leader of the chapter’s new Personal Finance Special Interest Group (SIG) and is looking forward to the mutual sharing of information with other AAII members.

Disclaimer: John Williams is not a financial advisor, does not provide financial or tax advice, and is not representing any company, or AAII. This information is for educational purposes only.