Craig Wear, CFP® explains that Roth conversions can save taxpayers significant amounts—thousands to millions—if executed correctly. He identifies two main mistakes (being unaware conversions exist, and over-converting which raises upfront taxes) and urges a planned approach that considers how much to convert, timing across years, charitable donations, and income needs.
Roth conversion can save you big, but only if you do it right. Roth conversion can save you thousands, tens of thousands, and if you're an IRA millionaire, millions of dollars in taxes. But here are the two biggest mistakes that people make. Number one, they don't even know it exists. No conversions equals a lot more taxes later. Or number two, they over convert. Yeah, that they try to save too much now, which really means that they're going to pay more tax up front than if they did nothing at all. Don't just convert blind. Finally, ask how much should you convert? Over how many years will charitable donations reduce your need to convert? How does it mix with your income needs? A good plan saves you taxes. A bad one burns your wallet.
