In this video, Craig Wear, CFP®, warns IRA millionaires—individuals with $1‑$3 million in tax‑deferred retirement accounts—about a looming problem he calls the “RMD avalanche.” As required minimum distributions (RMDs) begin in the early 70s, the growing balance of a large IRA forces increasingly large taxable withdrawals (e.g., $120 k at age 73, $194 k at 78, $300 k at 83), stripping investors of income flexibility and dramatically raising lifetime tax bills. Wear argues that the usual Roth‑conversion advice—focused on staying in a low tax bracket or avoiding Medicare thresholds—misses the core issue, which is the sheer size of future taxable income, not the direction of tax‑rate changes. He introduces his firm’s “Rothology” framework, which advocates converting larger amounts earlier, even if it means moving into higher tax brackets, because mathematically this reduces total taxes and preserves more wealth for heirs. Wear offers an RMD calculator that estimates lifetime tax liability and estate impact, backed by data from over 3,000 clients, and invites viewers to assess their own situation.
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Your IRA success has created a problem, and it's a new kind of problem that maybe you didn't anticipate when you were slugging it away year after year, just saving money. And most advisors were never trained or allowed to actually help you solve this particular problem. So after decades of savings, many IRA millionaires accumulate $1 million, $2 million, and sometimes even $3 million in tax-deferred accounts. But large IRAs eventually trigger something most people never really anticipate, which is massive forced taxable income that you may not even need. And that creates something called the RMD avalanche. That's not a technical term, obviously. It's just my way of helping you to understand what's going to happen to you. See, that IRA growth causes your RMDs to explode. And when your RMDs explode and get really big, it forces income into your life that is pretty significant. For example, if you start with a couple million dollars at age 65, by the time you're 73 years old and you start required minimum distributions, that's going to be worth maybe a little over $3 million in your IRA. Your RMDs are going to be about $120,000 the very first year that that happens. And as it continues to grow, by the time you're 78 years old, that $2 million can become $4.2 million. That's $194,000 a year of forced taxable income. And by the time you're 83 years old, if you haven't spent all the money, then you got RMDs of a little over $300,000. And once RMDs begin, you lose control of the amount of taxable income every year, even if you don't need the money. So the real problem isn't future tax rates, although that's what everybody would like you to believe. The real problem has really nothing to do with trying to figure out are rates going to be higher in the future or lower. And yet that's common advice that I hear all over the place. Yet most Roth advice focuses on just that, predicting future tax brackets. But mathematically, Paying tax now or later at the same or even a higher rate produces the same result. The real problem then is the size of the future taxable distributions. Large IRAs create escalating RMDs, a permanent taxable income, and loss of flexibility in the way that you pay the taxes and the amount of the taxes that you pay. And this is where most advisors miss it. Typical advice says, hey, stay in your tax bracket, don't cross Medicare thresholds, or okay, just kind of convert slowly because, you know, you're already in a high tax bracket. But for IRA millionaires, you're going to pay much larger lifetime taxes in many cases if you follow this advice. So we've kind of developed something over the years, a process that we call Rothology, and the insights that we've gained from that kind of come down to this as the bottom line. You're going to need to convert more sooner, and you'll likely have to go to higher brackets than you've been told in order to really win the tax game. Mathematically, it gives a much improved outcome. Almost every time we have somebody that is what we call an IRA millionaire. 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. Click the link below. It'll take you about 2 minutes and it'll be pretty alarming. Take care.
