Craig Wear explains three Roth conversion mistakes: not doing them at all, converting too much and paying excess tax upfront, or converting too little. The key is asking how much to convert and over how many years, especially when RMDs arrive and you can use charitable donations and standard deductions to offset taxes.
Roth conversions can save you hundreds of thousand dollars in retirement taxes. But here are the three biggest mistakes that people make. Number one, they don't even know it exists, so no conversions equals a lot more taxes later. Number two, they over convert. Yep, trying to save too much taxes means paying more tax up front than if they did nothing at all. Or number three, they under convert out of lack of experience. They simply don't convert enough and they end up paying a lot more tax than they should. So don't just convert blindly. Ask how much should I convert over how many years is the optimal strategy for me? And will my charitable donations reduce my need to convert? What about my standard deductions at the time that RMDs are due? Look, a good plan is going to save you taxes. A bad one is going to burn your wallet.
