Craig Wear explains why Roth conversion plans fail: not because they're poorly designed, but because people stop adjusting them as their life changes. A perfect plan drifts off course if you don't update it when income, marital status, or tax circumstances shift.
Most IRA millionaires don't lose tax savings because they made a bad Roth conversion plan. They lose them because they followed a good plan. Because having a Roth conversion plan and being protected by it are not really always the same thing. So let's say you're flying from JFK in New York to LAX in California. Before takeoff, pilot creates a flight plan that gets you to your destination. But here's what happens when the pilot is just one degree off course. At first, you really can't tell and it looks like everything's going fine, but over a long enough distance, that one degree deviation makes a really big different. So instead of arriving at LAX, you maybe wind up 40 miles off in the Pacific Ocean. Not because the pilot made a bad plan, but because even a good plan only works if the actual journey matches the exact plan. And that's the mistake many IRA millionaires make when they build their own Roth conversion plan. They use the best information available at the time, but over several years of plans in action, the assumptions underneath the plan are constantly changing. Change in income can alter how much room is available for future conversions, and a strategy built around a married couple may look different after one spouse dies. Well, that doesn't mean the original plan was bad. The problem comes from expecting a plan built on old information to keep producing the right answer. And here's how big of a difference that one degree makes in a retirement plan.
