Transcript

Everyone says, “Do a Roth conversion. It’s free money.” But what if that free money ends up costing you more in taxes than you’ll ever save?

Hi, I’m Hunter Brockway with Boca Retirement Strategies. And today, we’re going to break down the three biggest Roth conversion mistakes I see retirees make—and how to do it the right way. At Boca Retirement Strategies, we help retirees and soon-to-be retirees make tax-smart decisions so they can keep more of what they’ve earned. Let’s jump into how Roth conversions can either be a brilliant move or a painful one.

When you convert money from a traditional IRA into a Roth, you pay taxes today—so future growth and withdrawals are tax-free. Sounds great, right? But here’s the fine print: If you do it when your income is already high, you might shove yourself into an even higher tax bracket and trigger Medicare IRMAA, and even pay state tax if you’re still up north.

I once met a couple who converted $300,000 all at once. Their accountant hadn’t modeled the bracket jump. Their taxes nearly doubled that year. Had they spread that over three years, they would have paid about $45,000 less in taxes.

Now, that’s not to say that sometimes mega Roth conversions don’t make sense. I’ve had clients where, while paying a large tax bill in a single year, it actually made more dollar sense than spreading out the conversion. The key is to look out into your tax future at least 10 years.