The Million Dollar Cost of Waiting Mistake!

In this week’s Hidden Wealth Reviews, I teach about the million-dollar cost of waiting mistake. Our client, Dan, used our free, online resource available at RetirementTaxCalculator.com. Dan discovered the tax risk road on which he was traveling. Learning about his future tax exposure was a real eye opener for him. Dan was in his fifties and, like most people with whom we meet, he had saved most of his money in tax-deferred accounts such as 401(k)s and IRAs. Dan was concerned about the most tax-efficient way to get his money out of these accounts.

A recent Kiplinger article stated that there are three reasons to do Roth conversions in your peak earning years:

1. Pessimism about future tax rates. The current tax code for individuals is set to expire (sunset) on December 31, 2025. When this happens, marginal rates will increase. While you might not pay more in total tax, this could increase the cost of Roth conversions.
2. Significant savings in pre-tax accounts. If you’re 55 and have saved $2 million in pre-tax accounts and you earn 7.2% per year between now and age 75, your retirement account balance will be approximately $8 million. The first year required minimum distribution (RMD) will be $320,000. This will send your tax rate above where it is today and cause higher taxes than the taxes you pay today. It makes sense to Roth convert if your future marginal rate will go higher. Your financial plan should contain a tax projection. If it doesn’t, you should ask your financial professional to provide you with one.
3. Your heir’s tax rate is higher than yours. If leaving a legacy is important to you, you must consider the tax rate of the person(s) who will inherit your account. If the total tax bill paid today is lower than the rate paid down the road, a Roth conversion would make sense in that it would save the inheriting person taxes in the future. In general, the rule for Roth conversions is confidence that today’s tax rate is lower than tomorrow’s rate.

Dan has been able to save $1.3 million for retirement. He projected his future tax rate, over the rest of his lifetime, would be 25%. However, Dan hadn’t considered the impact of his RMDs, which amount to about $250,000 a year! That amount would definitely take Dan beyond the 25% marginal tax rate that he had estimated. Dan was also estimating a 5% rate of return. Interestingly, the higher the return, the higher the tax. As it turned out, Dan had drastically understated both his growth and his tax rates. Using corrected assumptions, his projected tax was going to be $1 million more that his current account balance!

We use tax credit and tax deduction strategies which enable our clients to remove their wealth from the tax system. The longer you wait to do a Roth conversion, the more tax liability you accumulate in your tax-deferred accounts. Ideally, you want to Roth convert your account before it accumulates too much tax liability and before the tax rates increase. You want to take advantage of not losing to the cost of waiting. It will be a very expensive procrastination.

Lately, I’ve been teaching about tax credits, which are a dollar-for-dollar way to eliminate unnecessary taxes. Right now, both tax rates and tax credits are on sale. At the moment, tax credits are selling at a discounted rate of 70 cents on the dollar. Tax credits are sold in $100,000 increments so, $70,000 buys you a $100,000 tax credit.

If you have been told not to do Roth conversions because you make too much money or because your IRA balance is too high, etc., consider that the reason you are being told this might be because your advisor doesn’t have a solution that addresses these issues. Everyone should have a tax plan because, if you don’t, the government has one for you! I want to teach you how you can have your own tax plan.

This may be the lowest tax environment that we’ll see for the rest of our lives. Let me teach you how you can have your own tax plan. Go to RetirementProtected.com and register for this coming Tuesday’s Remove Your Wealth from Washington webinar. Act before the ability to Roth convert is removed just like the stretch IRA has been taken away. This legislative risk is real! The proposal to eliminate Roth conversions is already in the works.

Kamala Harris voted for $93 trillion in new taxes. If the Democratic ticket should win in November, taxes could get real ugly, real fast. Roughly every 100 days, we add $1 trillion to our national deficit! You could tax every American at a 100% tax rate and still not have enough money to pay for the spending proposals!

Learn More About The Cost of Waiting

Let me teach you how to avoid unnecessary taxes. Register for this coming Tuesday’s Remove Your Wealth from Washington webinar where I will teach about the 10 times tax deduction, tax credits and how to use these strategies in combination.

I want to teach you how you can have your own Tax Savings Analysis Blueprint that can find up to 91 CPA-approved tax-savings strategies. This Blueprint allows you to get your wealth planning and your tax planning on the same sheet of music.

This is not the time to sit on the sidelines. These strategies take time to learn and implement so, the time to take action is now. We will not be taking on any new tax cases after the next few weeks in order to be sure there is enough time to implement these plans before year end.

If you’re serious about your taxes and you want to learn what you can do to prevent paying unnecessary taxes, take the following steps:

1. Go to RetirementTaxCalculator.com and learn your tax risk road,
2. Go to RetirementProtected.com and register for Tuesday’s no-cost, no-obligation webinar.

Once you’ve registered, you’ll receive an email containing a personal access link to join Tuesday’s event. Don’t forget to add it to your calendar!

You work hard for your money. Learn how to protect yourself from Washington’s war on your wealth.

Note: We serve Boomers and Retirees all over the Unites States. We have an efficient, supported process to meet online, as have been doing for over 20 years. Our online meetings are private, the access is restricted and we never share our meeting link with anyone who’s not a part of the meeting.

Chuck Oliver
Wealth Strategist | Best-Selling Author
We help Baby Boomers and Retirees thrive in retirement through a clear retirement road map that provides market correction and tax protection to optimize income and assets!
www.TheHiddenWealthSolution.com