Category: Oil & Gas Investing

4 posts

Should I convert my IRA to a Roth IRA?

What is a ROTH IRA?

A Roth IRA is an individual retirement account in the United States that is funded with after-tax dollars and allows tax-free withdrawals after retirement. Contributions are not deductible on one’s tax return, but earnings can be withdrawn tax-free upon reaching age 59½ or upon becoming disabled or after the death of the account holder, provided the account has been open for at least five years.

What are the Benefits of a ROTH IRA?

1. Tax-Free Earnings: Contributions made to a Roth IRA are made with after-tax dollars, meaning that you do not receive a tax deduction. However, the money in your Roth IRA grows tax-free, so you don’t pay taxes on your earnings when you make a withdrawal in retirement.

2. Flexible Contributions and Tax-Free Withdrawals: You can make contributions to your Roth IRA at any time, and you can withdraw your contributions (not gains) without paying taxes or penalties, conversions that are not aged for 5 years and if you are not 59 1/2 will face a penalty for withdrawals.

3. No Required Minimum Distributions: Unlike other retirement accounts, Roth IRAs do not require you to take a minimum distribution at a certain age. This allows you to keep your money in the Roth IRA for as long as you want (unless you need it for something else).

4. Inheritance Benefits: If you leave your Roth IRA to your beneficiaries, they can continue to use the funds for retirement and don’t have to pay taxes on the earnings.

What should be considered when deciding to convert a traditional IRA to a Roth IRA?

1. Current Tax Rate: The most important factor to consider when deciding whether to convert a traditional IRA to a Roth IRA is your current tax rate. If you expect your tax rate to be higher in the future, it may make sense to convert now and pay taxes on the amount converted at your current rate.

2. Investment Time Horizon: If you are planning to retire soon, converting to a Roth IRA may not be the best option since you may not have enough time to benefit from the tax-free earnings, converted accounts need to be aged for 5 years to not pay taxes or penalties on withdrawals.

3. Investment Objectives: If you are looking to maximize your retirement cash flow, converting to a Roth IRA may be a good idea since you won’t have to pay taxes on your earnings when you withdraw them in retirement.

4. Income Limits: There are income limits for contributing to a Roth IRA, and if you are above the limit, you may not be able to contribute. If you are above the income limit, converting to a Roth IRA may be the only way to take advantage of the tax-free earnings.

What is a back door Roth?

A back door Roth is a way to contribute to a Roth IRA even if your income exceeds the Roth IRA income limits. It involves making a non-deductible contribution to a Traditional IRA and then immediately converting it to a Roth IRA. Since the money in the Traditional IRA was contributed with after-tax dollars, the conversion is not taxable, and the account holder can then enjoy the tax-free growth of a Roth IRA.

What are the disadvantages of converting an IRA to a Roth IRA?

1. Tax Liability(cost): Converting to a Roth IRA will result in a tax liability since taxes must be paid on the amount converted. This can be a significant amount, especially if you are converting a large amount from your traditional IRA.

2. Contribution Limits: The maximum contribution is relatively low, you will need other investment vehicles to save enough for retirement.

3. Loss of Deductions: Any contributions you made to a traditional IRA are no longer tax-deductible, so you will lose out on any tax savings you would have received.

4. Early Withdrawals: If you make a withdrawal from a Roth IRA before you reach age 59 ½, you may be subject to taxes and penalties

What is the process for converting a traditional IRA to a Roth IRA?

1. Choose a Roth IRA: The first step to converting a traditional IRA to a Roth IRA is to choose a Roth IRA provider. You can open a new Roth IRA or transfer your existing traditional IRA to an existing Roth IRA.

2. Open an Account: Once you have chosen a Roth IRA provider, you will need to open an account. You will have to provide your personal information and make an initial deposit.

3. Make the Conversion: Once your account is open, you will need to make the conversion. You will need to fill out the appropriate paperwork and specify the amount you want to convert from your traditional IRA to your Roth IRA.

4. Pay Taxes on the Conversion: Any amount you convert from a traditional IRA to a Roth IRA is subject to taxes. You will need to pay taxes on the amount you convert in the year you make the conversion.

5. Monitor Your Account: Once you have converted your traditional IRA to a Roth IRA, you will need to monitor your account. You will need to make sure that all contributions and withdrawals are in accordance with the rules and regulations of the Roth IRA.

If you are looking for a way to maximize your cash flow in retirement, then converting your traditional IRA to a Roth IRA to produce tax-free income is a no-brainer. The view that tax rates are going up in the future is widely accepted ( all the tax deductions from the 2017 TCJA are set to expire at the end of 2025), so at conversion, you are potentially paying a lower tax rate now and creating tax-free cash flow for retirement. Additionally, the removal of required minimum distributions puts you in control of when you access your savings. So, what stops most from converting? The biggest deterrent for converting an IRA to ROTH IRA is the tax liability that is created from conversion, you will need the cash to pay the IRS in the year of conversion. Invito Energy Partners can help you eliminate or substantially lower the tax liability, allowing you to reap all the benefits of a Roth IRA conversion. Don’t miss out on this amazing opportunity, contact us today to learn more.

If you have any questions, or market information please contact me so we can talk.

Steve Blackwell

CEO & Managing Partner

Invito Energy Partners

sblackwell@invitoep.com | invitoep.com

According to Steve Blackwell, CEO and Managing Partner of Invito Energy Partners, the energy industry  faced several challenges in 2022 including labor shortages, increased costs due to supply chain issues, a changing regulatory climate, declining refining capacity, and declining commodity prices in the second half of the year.  Blackwell notes that these issues are primarily a result of the COVID-19 pandemic with the associated shutdowns and supply chain disruptions  and uncertainty brought by ongoing international conflicts and domestic fed policy with interest rates.

The energy industry has been impacted by political tensions between Russia and Ukraine, with Russia using energy as a tool to erode support for Ukraine. Russian energy companies have limited the flow of natural gas to Europe, causing prices to rise and prompting countries to search for alternatives. This has led to increased oil and gas revenues for Russia as countries are willing to pay a premium for more Russian energy.

However, Russia’s reliance on the globalized energy market to support its economy has begun to have negative consequences. The Ukraine war and the West’s aversion to Russian energy imports could lead to the end of the international oil market, with a more regionalized version defined by politics taking its place. In response, the European Union and the Group of Seven nations have begun phasing out Russian oil imports and have approved an oil price cap for Russian imports, which could significantly impact Russia’s energy revenues.

Looking ahead to the first half of 2023, Blackwell expects commodity prices to remain range bound and relatively stable, but with the potential for higher prices as we approach the end of the second quarter as demand concerns subside and the market returns to a focus on supply. He also expects OPEC to continue its prioritization of higher oil prices over market share. He also sees the costs for drilling of wells to stabilize and decrease as we move through 2023.

“The biggest challenges facing the industry recently have been labor shortages, increased costs due primarily to supply chain issues, an ever-changing regulatory climate, refining capacity declines, and recent declines in commodity prices from the highs during the second and third quarters of 2022,” Blackwell explains.

Despite these increasing hurdles, Steve Blackwell remains optimistic about the future of the energy industry. He believes that with the right strategies in place, the industry can meet the challenges of the present and build a more sustainable and prosperous future.

Overall, the energy industry is facing a range of challenges, but there are also opportunities for growth and innovation as the industry adapts to changing market conditions. As Blackwell notes, the key will be to stay informed and stay nimble in order to navigate the shifting landscape and emerge stronger on the other side.

About Steve Blackwell

Steve Blackwell is the CEO and Managing Partner of Invito Energy Partners. With over 14 years of experience in the energy industry and more than 20 years of executive-level experience, Blackwell brings a wealth of knowledge and expertise to his role.

During his tenure as President of Petromax Operating, Blackwell oversaw the deployment of over $100 million in investor capital into three operated fields, where the company leased over 86,000 acres of mineral land and drilled 39 horizontal wells. He also oversaw the divestment of these assets for nearly $900 million, with an average rate of return of 370%.

As Chief Operating Officer of U.S. Energy Development Corporation, Blackwell oversaw the deployment of over $100 million in investor capital, resulting in the drilling of 29 wells in the company’s Eagle Ford shale asset. Under his leadership, the company was able to decrease costs per well by 25%, increase average EURs by 5%, and increase the return on investment. Blackwell holds a B.S. in Business Administration, Finance, and Accounting from Central Michigan University.

Opinions expressed by US Business News contributors are their own.

Today with Steve Blackwell, we cover some interesting shifts in the oil and gas market. The shale revolution changed the global dynamics as a commodity and its price. The ESG investing movement came after that and brought some good and bad things to the market.

The ESG investing movement accomplished two things. Limiting the capital for drilling programs and investors demanding returns in months rather than years. The United States industry listened, evident today with the many returns provided to investors. The world listened, and the activist and fear to invest in drilling programs have left the supply side short for the next decade, even with demand destruction.

Steve is an industry expert and has seen many different types of operations. We had fun and see what may be in store for investors and consumers.

Thanks, Steve, for stopping by the ENB podcast. – Stu

Please reach out to Steve Blackwell on his LinkedIn HERE. And the Invito Energy Partners website is HERE.


This news interview originally appeared on EnergyNewsBeat.com, and was hosted by Stu Turley, CEO, of Sandstone Group.

Another decade is in the books…and boy has 2020 been a knee slapper. The ability to predict the future could deliver infinite profits…so how is that going for you?

“History repeats itself, but in such cunning disguise that we never detect the resemblance until the damage is done.” –Sydney J Harris

“Those who cannot remember the past are condemned to repeat it.” –George Santayana

The 2010s took most of us by surprise. U.S. stocks rallied all decade long, emergency-era monetary policy persisted throughout the decade, and yet neither inflation nor a convincing economic recovery ever occurred. But boy, was there money to be made just by sitting in U.S. equities.

Interest rates peaked in August 1981, the result of Fed Chairman Paul Volker’s efforts to conquer inflation which reached as high as 14.5%. Since that time, interest rates have steadily fallen to where they are today. The rate of inflation has fallen but the value of money has also depreciated. The dollars you hold in your pockets today buy less goods and services every year. If we begin with $1,000,000, below is the annual income per year in each decade if invested in 10-year US Treasury bonds.

1980s: $140,000

1990s: $80,000

2000s: $50,000

2010s: $40,000

2020s: $7,000

That’s a 20x decrease in income. While inflation has fallen, the purchasing value of money and its return has also fallen dramatically. The federal reserve would not allow asset prices to fall and had the power to make sure it didn’t happen by implementing QE and other methods.

Why are they doing this? One word…debt.

As the economy heads into a retraction, credit spreads between treasury debt and corporate debt start to widen as the risk of default rises on lower-quality debt. So…the Fed intervenes with bond buying to keep the bond market from imploding, which is why they are expanding their balance sheet. Currently the Fed’s balance sheet will go from $4 trillion at the start of 2020 to $10 trillion by year end.

This is good news if you are a debtor…not so much as an investor. Cash yields next to nothing, money markets are at 0.0% and even short-term treasury yields are below inflation rates. Translation…you are losing money after taxes and inflation on cash investments.

This brings us to the devaluation of the US dollar. It will be sudden and come out of nowhere, but the only relief valve out of our mounting debt will be a devaluation. Overnight, tens of trillions of government debt will be wiped out and become worthless to those who hold this debt, be it foreign governments, pensions, companies, or individuals.

What trend should an investor do with inflation on the horizon? THINGS!

Investors have been following the deflationary trend of the last decade. This was a period when paper assets such as stocks and bonds did well. This led to the index bubble and the proliferation of passive investment strategies. It didn’t matter if you owned stocks or bonds, both made money over the last decade. Indexing led to extreme market valuations as the index favored large-cap stocks which drove the indexes higher. The result was most of the index returns were concentrated in a handful of stocks, giving the illusion of the overall index performance.

This new trend will take the place of depreciating paper money and into things: natural resources, hard assets, and businesses involved in both. This trend will be fueled by resource shortages and a tidal wave of money printing. But there are two things the markets aren’t ready for right now which are the return of high oil prices and inflation.

The markets have bought into the idea that we have reached peak oil demand as a result of COVID-19 and that we are entering a new green economy where electric cars will replace the gasoline combustion engine. This is utter nonsense and wishful thinking. Electric cars make up only 0.3% of the global car fleet. This is an opportunity that few investors will see coming, and it is why we started our Tax Advantaged Energy Fund (TAEF) which invests into direct energy investments. Its benefits are long-term hard assets that are immune to inflation, cash flow and substantial up front and ongoing tax benefits.