THe effects of not doing a Roth conversion

Let's look at the possible effects of not converting to a Roth IRA

Mistake #1: Thinking that your growing IRA is a good thing in the long term.

Don't discount the effect that the growth in your IRA will have on your RMD and tax liability in

the long term. Even with conservative growth, your IRA may more than double in 10 years.

Fact: RMD's are NOT static. They increase over time based on your age and account balance.

Fact: The goal of the IRS Tax Code is that you have withdrawn every penny of your IRA and paid tax on it

in your lifetime! IRS math subjects you to a greater taxable RMD distribution each year, increasing by

50% in 10 years!

Consequence: As your IRA balance grows over time, the resulting RMD's get even larger, and of course,

your tax liability gets bigger as well!

Solution: By converting to a Roth IRA, you reduce or eliminate RMD's.

Additionally, ALL of the growth and income that occurs within the new Roth account is totally free

of income taxes - Forever!

Mistake #2: Deciding not to convert because of concerns of higher taxes on social security benefits.

Fact: RMD's increase over time and higher RMD's will result in higher income and higher total taxes,

including a higher tax on your social security benefits.

Consequence: Deciding not to convert to avoid higher taxes in the short term (only during conversion years) can subject you to higher total taxes over your lifetime.

Solution: Convert to a Roth IRA to realize a huge tax savings over the long term.

The short term tax consequence of a Roth conversion are insignificant compared to the

long term tax liability created by your increasing age, a higher IRA account balance and RMD's.

Mistake #3: Deciding not to convert because of concerns about increased Medicare premiums.

Fact: RMD's increase over time and higher RMD's will result in higher income and higher IRMAA surcharges.

IRMAA (Income Related Monthly Adjustment Amount) is the surcharge you are subject to when your

income increases due to RMD's being added into the picture. This surcharge can dramatically increase

your Medicare Part B & D premiums!

Consequence: By not converting to a Roth, you subject yourself to a lifetime of larger IRMAA later!

Many people mistakenly decide to not convert to a Roth IRA to avoid higher IRMAA surcharges in the

short term. Remember, you only pay higher IRMAA surcharges while doing conversions, which

typically is 2-5 years. When the conversion is complete, and after a 2 year lookback, your Medicare Part B&D premiums go back to minimum amounts!

Solution: Convert to a Roth IRA to reduce or eliminate IRMAA surcharges over the long term.

The short term IRMAA surcharges are small compared to the large tax

savings you will realize as a result of the Roth conversion.

Mistake #4: Overlooking the ongoing tax deferred growth in your retirement accounts.

Fact: Depending on your current age and portfolio performance, your retirement account may grow by

2-3 times its' current balance.

Consequence: The ongoing tax deferred growth in these accounts will lead to even larger RMD's and substantially higher overall tax liability in the long term. For many people, the additional

tax liability incurred by NOT converting can be hundreds of thousands of dollars!

Solution: While no one likes paying taxes, they are inevitable. However, you can control how much you pay.

By converting to a Roth IRA sooner, you are removing the IRS from future IRA growth and a much

higher overall tax liability.

Even if you are not concerned about leaving your heirs a large amount of money, why let the

U.S. Treasury be the biggest beneficiary due to your complacency and inefficient tax planning!

Pension Pros

Pension Pros

THe effects of not doing a Roth conversion

Let's look at the possible effects of not converting to a Roth IRA