CFP Craig Wear shows how David and Carol cut their lifetime tax bill by $1.8 million through Roth conversions before RMDs kick in at 73. If you have a traditional IRA over $1 million, converting early in your late 50s or 60s can shrink the balance before required distributions force you into a higher tax bracket.
Most people think RMDs are a problem just deal with later. But for people with large IRAs, like $1 million plus, the real danger stays hidden for years before the first required withdrawal ever begins. Because RMDs are only one part of the problem. You see, the real danger actually lives in your IRA itself. You see, your IRA is kind of like a tree. You start by planting a sapling and with care, dedication over time, it grows into a beautiful tall oak tree. And a lot of people focus on growing the tallest tree possible because a tall tree looks impressive and sturdy. And that's what makes this trap so easy to miss. Because tall trees may look sturdy, but when a storm comes, it has a different problem than a smaller tree. It catches more wind, it takes more force, and the bigger it gets, the more damage it can do if it falls. So if your IRA is the big tree, RMDs are that storm. And the taller that tree is by the time the storm hits, the more dangerous it becomes. Most people look at that and think the answer is just to hope the storm is not too bad or wait until it arrives and deal with the damage then. But that's not how you protect a tree. You protect a tree before the storm comes by making sure there's less strain on it, less weight pulling against it. Because when you cut back some of the branches while you still have control, the tree catches less wind and is much less likely to fall over when the storm finally hits. We have some friends in Florida who have this beautiful ficus tree. Every year they have a nursery come in and they get in and they just chop the heck out of the tree. They take a lot of the interior branches off and it's for this reason. It keeps the tree healthier, but in their case, they live right on the intercoastal and it keeps the wind from just blowing down this beautiful decades-old tree. That's the shift that most people miss with a large IRA. And with the traditional IRA, that means strategically using Roth conversions to reduce the size of that account before RMDs begin. So that's exactly what we did for David and Carol many years ago. And instead of waiting for RMDs, we started reducing the size of the traditional IRA while they're in their late 50s and early 60s before they even became a problem. That one shift helped reduce their projected lifetime tax bill by $1.8 million.
Hey, if you've got a million or more in your IRAs, the IRS already has scheduled one of the biggest tax bills of your entire lifetime. It starts at 73 or 75 years old. The problem is most people just haven't seen the number yet. We have an RMD calculator that we've put together that'll give you an idea what the tax is going to be over your lifetime, as well as maybe what's going to be left for your heirs if, uh, you leave it all to them. Um, we've taken it a step further and we've cross-referenced that to people just like you that have been clients of ours, over 3,000 of our clients. And we want to be able to give you an idea what's possible for you to save if you get Roth conversions done right. So click the link below, take you about 2 minutes, and it'd be pretty alarming. Take care.
