Financial planner Craig Wear analyzed thousands of Roth conversion plans and found that starting immediately can save $2 million to $3 million in lifetime taxes. Waiting just one year costs about $66,000 in lost savings. Delaying until retirement or a lower tax bracket doesn't help; the window to convert shrinks either way.
I've studied over thousands of conversion plans from our actual clients to see how much money they would have lost out on by waiting to start on their plan. And the number came out of that research was shocking. Here's what it looks like for a well-executed Roth conversion strategy if it started now with a full planning period. If you have that full year of planning to coordinate everything properly, it produces lifetime tax savings could be up to $2 to $3 million. And that's, that's kind of a baseline. That's what acting looks like. Here's what it looks like. If this person waited just even 1 year, their lifetime tax savings drops to $1,768,649. So waiting just 1 year cost them $66,000 and over $400. Think about what you could do with that money, $66,000, not because the plan got worse or because anything went wrong. It's just because the window was 1 year narrower. But that's not even the most shocking part because when we look at it as if this person waited 5 years, we see their lifetime tax saving drops to $1,400,000 and some odd thousand dollars. How, I can't tell you how many times I've had people say, look, I'm going to be retiring in a few years. I think I'll just wait till then to do this, or I'm going to be in a much lower tax bracket several years from now. So I'll just wait and do it then. It never works out to be in their benefit. You can't save taxes by waiting and trying to convert a much higher tax balance. It just doesn't work.
