Craig Wear, CFP, breaks down three costly Roth IRA conversion mistakes: converting only to the top of your tax bracket, stopping to avoid higher Medicare premiums, and stopping to prevent Social Security taxation. These overly cautious limits often cost retirees more money long-term.
We've found that even the smartest and the wealthiest of retirees or soon to be retirees often make mistakes. When it comes to this subject of doing Roth conversions, I want to cover the three most common mistakes that we watch people make. So mistake number one, a lot of people make the mistake of converting only enough to get to the top of their current tax bracket. If you're an IRA millionaire, that approach is going to result in you paying a lot more taxes later when tax rates might be higher. Mistake number two, it's similar, but it's the mistake of stopping conversions at a dollar amount that puts you into higher Medicare premiums. Mistake number three, it's going to a ceiling that says, hey, I'm going to stop the conversions because if I do any more, my Social Security benefits are going to be taxed more. In the south, we had an old saying that said stepping over $100 bills to pick up dimes.
