CFP Craig Wear explains how retirees with large IRA balances can avoid millions in taxes by converting to Roth IRAs before required minimum distributions start at age 73. Converting during lower-income years lets you pay taxes now instead of facing forced withdrawals that push you into higher brackets later, potentially saving hundreds of thousands or more.
First, there's one mistake that makes higher taxes in retirement almost unavoidable. In the last few years before retirement, your income usually looks fairly steady. You have income from work, investments, maybe a business. You stay in roughly the same tax bracket each year. Then retirement starts. The paycheck goes away, but it gets replaced by Social Security, by pensions, maybe rental income and capital gains. That income already fills up a large part of your tax bracket. And then at age 73, required minimum distributions, RMDs, begin. Every year, the IRS tells you exactly how much you must take out of your IRA and 401 and count it as taxable income. And that's whether you need the money or not, folks. So if you've saved over $1 million, that income now stacks on top of everything else. Instead of smooth taxes, your income piles up. You get pushed into higher brackets, and guess what? You lose control. That's the tax trap. Now, here's the move that changes the entire picture. We don't eliminate taxes. We change when you pay them and at what rate. So by converting part or all of your IRA to a Roth IRA intentionally before RMDs begin, you can fill lower tax brackets now. The total amount of money doesn't change, but future RMDs stay lower forever. Your taxable income stays more controlled. This is where planning ahead makes such a massive difference. Even if RMDs feel far away, starting Roth conversions earlier gives you much more time to spread the taxes out intelligently. That's why our clients save hundreds of thousands of dollars and often even millions of dollars in lifetime taxes. So sometimes the smartest move is stepping into a higher tax bracket now to avoid being forced into a much higher one later. This matters even more today. Tax rates are at historically low rates, deficits are growing, RMD rules are tightening, and your heirs now face a 10-year forced distribution window. Right now, you still have room to plan, but that room shrinks every year. This isn't about making each year look perfect. It's about controlling taxes now instead of being controlled by them later.
Hey, if you've got $1 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 taxes are going to be over your lifetime, as well as maybe what's going to be left for your heirs if you leave it all to them. We've taken it a step further and we've cross-referenced that to people just like you that have been clients of ours, of over 3,000 of our clients. And we want to be able to give you an idea of what's possible for you to save if you get Roth conversions done right. So click the link below. It'll take you about 2 minutes and it'll be pretty alarming. Take care.
