Craig Wear compares two couples who did Roth conversions at different times. Mike and Ellen converted in their early 60s while working and saved $2.6 million in lifetime taxes. Chris and Laura waited until required minimum distributions started and saved $1.5 million. The sweet spot for conversions is roughly ages 59 to 75, when you still have tax flexibility.
Over time your tax flexibility declines, required distributions begin other income starts stacking in. We've seen this play out clearly over and over and over. We worked with Mike and Ellen and separately Chris and Laura, no relation. Both couples had about $2 million in IRAs and 401ks when they came to us. Both saved significantly on lifetime taxes, but Mike and Ellen avoided about 2.6 where Chris and Laura avoided closer to 1.5 million. What was the difference? Well, the only difference was that Mike and Ellen reached out in their early 60s while they were still working. Chris and Laura had waited until after RMDs had already begun. So if your best planning years are still in front of you, Roth conversions can save you hundreds of thousands in taxes between roughly age 59 and 75. You still have meaningful flexibility and even after that there's still a lot you can do. So you can still make good decisions. You just have fewer good seats to choose from.
