In this instructional video, CFP® professional Craig Wear explains common misconceptions that high‑net‑worth retirees (aged 60, 70, and 80) have about Roth IRA conversions and why those beliefs can leave their families with massive tax liabilities. He uses three case studies—a 68‑year‑old couple (John and Susan), a 70‑plus couple (Tom and Betty), and a generic 80‑plus scenario—to illustrate the pitfalls of (1) converting only up to the top of the current tax bracket, (2) assuming it’s too late to convert after RMDs begin, and (3) focusing solely on personal break‑even without considering heirs. For each age group, Craig outlines a better strategy: run side‑by‑side conversion scenarios, convert more aggressively (including converting after taking the full RMD), and evaluate the tax impact on spouses and heirs. He quantifies the potential tax savings (e.g., $1.8 million saved for John and Susan) and stresses that the ultimate goal is to minimize the tax burden on the family, not just the individual’s current return. The video ends with a call‑to‑action to a free live class (“9 Smart Moves That IRA Millionaires Are Making This Year”) for deeper, personalized analysis.
Chapters
A 60-year-old, a 70-year-old, and an 80-year-old each have $1 million or more sitting in an IRA, and all 3 are trying to decide what to do about Roth conversions. You'd think the 60-year-old has the easy call and the 80-year-old is too late to even bother, but that's not really exactly how it works. So what's actually happening is that each of them is holding onto a belief that sounds reasonable, but could leave their families with a huge tax bill they needed to pay. So in this video, we'll see what each decade gets wrong about Roth conversions, what it costs your family, and what to do instead. And at the end, I'm going to show you one thing all 3 decades get wrong, so you know exactly what to avoid. So if you don't know me, I'm Craig. My team and I have worked with more than 3,000 families, and our plans project over $10 billion of lifetime tax savings. And that conversation usually starts with people in their 60s. All right, so the belief that most people in their 60s get wrong about Roth conversions is this. Convert up to the top of your tax bracket every year and stop right there. If that's what you're doing, you're off to a good start. You're converting, and that already puts you ahead of most people, but converting to the top of your tax bracket is only part of the story. I once had someone on a call say this to me, I've done Roth conversions for the last 3 years in a row, but I don't know if I'm doing them right or the best way. So a lot of people who convert to the top of their bracket do so because it just seems like the safe option, seems like the logical option, but it's not your only option. There are better options that can make a huge difference to your family's nest egg if you're an IRA millionaire. So to illustrate this, let me show you an example of a couple from one of our live classes. We'll call them John John and Susan. So John and Susan are both 68 with about $1.3 million in their IRAs. If they do nothing, their projection shows about $2.3 million in tax over their lifetime. And that's counting what their kids would owe. It also includes their other income that's unique to them that maybe doesn't have anything to do with you, but $2.3 million. Now, if they follow the common belief to fill their bracket every year, their projection shows about $459,000 of tax that they can avoid over their lifetime. And that's not bad at all. In fact, I'd give that a little bit of a golf clap. Yep. Most IRA millionaires stop right there also, with the majority of that $2.3 million tax bill still waiting for them. Whatever they don't pay while they're both still alive lands on the widow, and then ultimately on the heirs. What actually protects John and Susan from most of these taxes looks a little scary at first. The best move is to convert nearly the whole IRA well past their bracket. All of a sudden, their tax bill jumps and their Medicare premiums go up for a while, and seeing this makes a lot of people nervous, but it's not the end of the story because then the conversions end. Shortly afterwards in the tax bill and the premiums come back down. And that projection, the kids' tax bill goes from almost $900,000 to zero because all their inheritance is in a tax-free Roth account. The family avoids $1.8 million in total taxes. That's more than $1 million beyond where the bracket plan stopped, all because they had a strategy that told them to pay more in taxes and Medicare premiums at the beginning so they could save over their lifetime. Now look, those are just their projections. We don't convert everything for everybody. Convert too much in the wrong situation, and you can end up worse off than if you'd actually done nothing at all. So here's what to do instead in your 60s. Don't let this year's bracket decide how much you convert. Run a few different conversion amounts side by side. Look for the amount that actually leaves you, your spouse, and your kids with the most in the end. And if you want to see that comparison laid out, that's what we do in our free live class titled 9 Smart Moves That IRA Millionaires Are Making This Year. It's the exact class where I walk through John and Susan's numbers. You can check it out at the link in the description. Let's talk about the next decade. It's time for the 70s. The belief most people in their 70s get wrong about Roth conversions is this. It's too late. I should have done it in my 60s. They'll say something like, RMDs have already started. The IRA is too big to fix. So I'll just pay the withdrawal tax every year. Look, I get it, but it is not too late. In my very first book, Paying the Piper, I wrote about a couple named Tom and Betty. Tom called me one Saturday morning after hearing me talk about Roth conversions on a live talk radio show I used to do. He'd rolled his 401 into an IRA that grew passed $2 million and by his mid-70s, his pension and Social Security covered almost everything they needed. They needed maybe another $10,000 a year from the IRA, but their RMD was almost $100,000. So he asked, why do we have to keep taking so much out? So we ran the numbers and found out that the answer was to start Roth conversions. So even in his mid to late 70s, Tom decided to convert. His CPA ran the numbers and ultimately, although grudgingly, he did agree with us after he was forced into running the numbers himself. So despite what people the internet might tell you, the math still works into your 70s. Every dollar you convert is a dollar that never shows up in an RMD again. Smaller RMDs down the road mean a smaller tax bill every year and a better shot at keeping your Medicare premiums down as well. But Tom's numbers weren't the only reason he decided to start converting in his 70s. I'll come back to that in just a minute. So, is it too late to Roth convert like so many people in their 70s believe? Of course not. As long as RMDs are coming out of your IRA, a conversion still has work to do. Here's what to do instead. If your RMDs have not started, If your RMDs haven't started yet, count the years you have left before they do and use every one of them to convert as much as you possibly can, and probably more than you think you should. If RMDs have started for you, and this really is important to listen, so please listen closely, take your full RMD for the first year, then convert. The IRS counts the first dollars out of your IRA each year toward your RMD, and the RMD itself cannot go into a Roth IRA. But once the full RMD amount is out, there's no limit on how much you can convert that year. The real question is how much makes sense, and that's the same side-by-side comparison we've ran for John and Susan. Next up is the next decade of your 80s. The belief most people in this group get really wrong about Roth conversions is this: a conversion won't pay off in my lifetime, so why bother? On your own tax return, you may be right. You pay the tax upfront and the payback comes slowly, so your break-even could be years away, maybe past your life expectancy. Most people hear that and they stop thinking about conversions at all. But look, there's a bigger issue at stake here. Break-even only asks you when you get your money back. It never asks who Who pays the tax you didn't convert? Because that tax doesn't go away. I mean, somebody has to pay it. While you and your spouse are both here, you pay it through your RMDs at your joint rate. When one of you is gone, which is likely to happen before the end of your life, whoever the remaining spouse is, is filing alone with tax brackets roughly half as wide or as large as if you're filing joint. And after that, when you're both gone, your kids get to pay it, usually within 10 years, thanks to the newer inheritance rules, and often right at their own peak Taxable income years, or at the time where they are just retiring or just did retire and they have their own tax plan. And now you dump all this taxable income on them. Remember how I said that Tom from earlier had a second reason for starting conversions in his late 70s? Well, the second reason was that he wasn't converting for himself. He had 3 kids, he had a wife, and he didn't want to leave them holding the bag with a lifetime of taxes attached to that bag of money. So in his late 70s, he converted the whole IRA, over $2 million in one year. And he did it for them. That wasn't my best advice to him, but that's how he wanted to get it handled. We did know he needed to convert, but that same reason holds up in your 80s. So here's what to do instead. Start by thinking about who's going to end up with all the money. Then compare what your family pays if you convert some of it now versus if you leave it for your spouse and your kids. If converting leaves them more, there's your answer. Now, here's one other thing that people really get wrong when they say, well, I'm going to leave $2 million or $5 million, whatever it's going to be, and they'll just be happy to have it. And that's a true statement. They started with nothing. You're going to give it to them. They're going to pay the taxes. They're We left with something. But if you really could pay less tax and they end up with the same or more, why would you want to give more tax just to the government just because you chose to just say, well, they'll, they'll get something? Because what you're saying by default is it's okay if the government also gets a big piece of whatever I have left in my IRA. So look, what's the one thing IRA millionaires get wrong at 60, 70, and at 80? They make the mistake of focusing on their own tax return, this year's bill, their own RMDs, or their own payback. But the people who end up paying the most are their spouse and their kids. So at the end of the day, ask yourself who you're really doing all this for. And if you want to see how your own plan holds up with conversions, our 9 Smart Moves class I mentioned before is a good place to start. So get a coffee, get comfy, and go through it with your spouse. The link's in the description and it's completely free. And if you're wondering where to start with Roth conversions this year, then check out this video right here.
