Furthermore, when you turn 72 years old in the United States, the Internal Revenue Service forces you to take a Required Minimum Distribution (RMD) from those retirement funds each year. This creates a taxable event. As respected Roth IRA purist Ed Slott says, this is the point when the federal government gets tired of waiting for you to drop dead. If we can’t laugh at our own humanity, taxes are the least of our problems.

One benefit of a Roth IRA is that it doesn’t require a RMD. However, the mechanics of converting a 401(k) or an IRA to a Roth can create some tax issues, and sometimes they can be substantial.

As an extreme example, let’s say you have $1 million in an IRA or 401(k), and you want to convert all of it to a Roth. It’s legal, but is it advisable? Not typically. Generally, there is a significant toll for taking money out of an IRA or 401(k) and moving it into a Roth. Investments withdrawn from those accounts are classified as income by the IRS.

Your taxable income would go up by $1 million, and your tax bracket would likely go through the roof. The cost to get those funds into the Roth might be more than 40%, depending on where you live.

The fundamental answer comes down to this: taxes today vs. taxes tomorrow.

Think about what normally happens in your 50s and 60s — progressing into your highest-earning years and most likely seeing your highest 401(k) balances or other retirement savings. If you’re making $200,000 annually and want to convert your 401(k) to a Roth, that might launch your tax bracket to the highest echelon.

Fast forward five years to when you’re no longer working and are entering retirement. It’s not uncommon to dip into a relatively low tax bracket. And if you aren’t yet 72, you don’t have to worry about RMDs. Why convert retirement money to a Roth at a 40% tax bracket when in a year or two you could potentially convert at a lower tax bracket? The delayed gratification of someday taking the tax-free money out of the Roth doesn’t always justify the immediate pain of putting it in.

If you knew your future tax rate would be the same as it is today (and, trust me, no one has a crystal ball for predicting future tax rates), the Roth conversion makes some sense, and even more so if you convert pieces of it in a tax-efficient manner. This is especially true if you have a pension coming that could prop up your earnings level when added to Social Security or other additional income streams.

Everyone’s situation is different, and it’s a complicated question to answer broadly. The key is to remember to compare taxes today vs. taxes tomorrow, and let that concept guide you. Quite often, that ends up looking like a phased, scaled Roth conversion that is done over several years.

Our other question came from Jonathan. He asked, “How does the 4 Percent Plus Rule operate with a diversified income portfolio consisting of domestic and international equities, real estate investment trusts (REITs), and master limited partnerships (MLPs)?”

That’s a lot to take in, so I think we need to simplify the question down to its core. “How are you supposed to diversify a portfolio using the 4 Percent Plus Rule?”

There’s no perfect answer, but I think I can get close.

One of my primary goals of financial planning is to find a way for people to pull out the maximum amount from their portfolios each year without depletion. We want them to live their best lives without going broke.

How much can you take out each year? I believe the number sits somewhere above 4%, as first explained by the 4% Rule, created by William Bengen. In 1994 he calculated actual stock returns and retirement scenarios for the previous 75 years and found that retirees who drew down 4% of their portfolio in the first year of retirement, adjusting every year for inflation, would likely see their money outlive them, assuming a 50% to 70% allocation in large-cap stocks, rebalanced annually with the remaining in bonds.

20 years later, Bengen discovered that if he added in some small-cap stocks, there was a good argument to be made that the figure could be adjusted up from 4% to 4.5% — the 4% Plus Rule.

Remember, this is just a guide. I think Jonathan understands that he needs 50% to 70% in stocks, but he’s wondering what to do with the rest. Specifically, he’s curious about REITs, MLPs and international equities. These parts of the portfolio are riskier compared to bonds and large-cap stocks, but they are all part of a well-diversified, income-generating portfolio.

REITs and MLPs typically carry a little more risk compared to large-cap stocks. They are both great for income but volatile like equities, and sometimes even more so. International stocks do make sense for most diversified portfolios, but they fall into that riskier category as well.

During big market corrections, stocks go down, but most of these other risk categories do, too. It would be improbable for the market to drop 20% without REITs or MLPs following suit. The fundamental principle is risk assets vs. safety assets. It’s important for every portfolio to have the right balance between the two. The beauty of this rule is that it is dynamic and can go up or down depending on the specific situation. We use this rule as a guide to help retirees stay happy because at the end of the day, that’s what I’m here for.

Both of these questions were right on the mark in terms of what investors need to consider when planning for retirement. Smart planning now can lead to good living later, and sooner than you might think.

Wes Moss is the host of the podcast “Retire Sooner with Wes Moss,” found in the podcast app right on your smartphone. He has been the host of “Money Matters” on News 95.5 and AM 750 WSB in Atlanta for more than 10 years now, and he does a live show from 9-11 a.m. Sundays. He is the chief investment strategist for Atlanta-based Capital Investment Advisors. For more information, go to wesmoss.com.

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