Bob Fraser explains why standard Roth conversion advice backfires for people with IRAs over $1 million. Converting at the top of your tax bracket can actually increase lifetime taxes for high-net-worth retirees. The strategy that works for modest accounts doesn't apply once you're in the top 10 percent.
If you know what your tax liability is going to be in a given year, you can actually optimize, right? Because you don't want to withdraw enough to bump you up to a higher bracket. You want to kind of stay under the brackets. So there's an optimization there.
You know, actually, Bob, you've hit on probably the biggest fallacy that the financial industry has fed to the public. What you just said is absolutely correct if you have less than a million bucks in your IRA. All of that that you read in the normal financial media is right for the average guy. You get to get to $1 million in your IRA, and you're the— you're in the top 10% of American savers, and the problems become different, and the solutions— now, I could show you many of our analyses that somebody with $1 million, $1.5 million, $2 million converted at the top of their tax bracket, and they ended up paying more tax over their lifetime than if they did not convert it at all.
