The ROTH Conversion TRAP That Destroyed $1M in Tax-Free Wealth

Comments · 110

• JO

  @JohnHoffler-s8n · 6 months ago

  <a href="https://www.youtube.com/watch?v=bR2v1ITrgl4&amp;t=495">8:15</a> this doesn&apos;t make any sense. Tom says the great thing you have while still working is excess cash flow, then immediately describes paying taxes from savings, as if that makes those dollars tax-free. It doesn&apos;t. Taking money from savings when you have excess income is functionally equivalent to spending from salary, since the 27%-taxed salary replaces anything you take from savings. <br><br>Plus, the claim that excess cash flow disappears the minute you retire is untrue. If you&apos;re taking social security and drawing from a taxable brokerage account that&apos;s appreciated 100% on average you&apos;ll draw nearly $150k before exceeding the $98k cap for the capital gains being tax-free. If you&apos;re deferring social security you have even more tax-free cash flow to pay what little bit of tax (at 12% say) &nbsp;is required for your post-retirement ROTH conversion.

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• CH

  @christopherbilkey5237 · 6 months ago (edited)

  I was lucky and took advantage of a one-time Roth conversion in 1998 that allowed converted taxes to be paid over a 4-year period. I just withheld extra wages from a new job to cover the additional taxes. For me it was the same as a 4-year car loan but, without the car. Compounding since has been amazing. Everybody who I talked to at the time about the opportunity poo pooed the idea.

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• DO

  @DonalMartin · 5 months ago

  This is the kind of mistake that feels small in the moment but becomes absolutely devastating over time. A Roth conversion can be an incredible wealth-building strategy, but only when it is planned with precision.

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• UL

  @ultramegasuper11 · 6 months ago

  Thanks. &nbsp;I started 10 years before retirement and you always wonder if it was the right move. &nbsp;I think it was.<br>10 years ago I never thought taxes would be as low as they are now. &nbsp;The government is pushing so much debt onto the next generation.

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• CI

  @cimmeronbrooks9430 · 6 months ago

  Your videos are super informative and I really enjoy your content.

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• BE

  @bebemalditos · 6 months ago

  My plan, lower my income by taking a less stressful job at age 55 and start ROTH conversions then. Paying the taxes with outside money is an interesting point. Thank you.

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• TA

  @TampaFloRaider · 6 months ago

  I started Roth. I&apos;m staying Roth. I convert my employer match as soon as the plan allows.<br><br>$1.5M Roth and growing. Alex P. Keaton would be proud.

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• BR

  @BrianSlowInvest · 5 months ago

  This is actually helpful, more videos like this please!

• SE

  @sergiylelyushkin296 · 6 months ago

  The money you use now to pay taxes on ROTH conversion can be placed to ROTH 401k through mega backdoor Roth if your 401K plan allows it, and they can grow tax free. In that scenario your early conversion idea only wins if current rate is 24% and retirement rate is 22%. With any other tax brackets it gives worse results.

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• 20

  @2026Retiree · 6 months ago

  Your channel is really growing Tom - great content! &nbsp;You are crushing it! &nbsp;I am 62 with a small Roth and a large 401K even my highly respected financial advisor says it’s 50/50 on what to do. His firm hired the brightest financial specialist and they are like if you don’t have excess cash to pay the taxes, then it’s 50/50 on conversion. I guess I am screwed. I ran this through Grok and it said the same. I have heard a rumor we may have a special conversion for IRA with 20% tax rate by 2028. I am hoping for that strategy because otherwise I am hosed.

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• BA

  @Bayou_Bandit · 6 months ago

  Just do exclusively Roth from the start if possible and avoid all of the headache later. Taxes are not going down

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• TC

  @tchang8816 · 5 months ago

  This video assumes that if you delay conversion your growth in the ROTH is delayed as if your money doesn&apos;t grow until you convert but that ignores the fact that it will grow in the 401k pre-tex.. &nbsp;Also if you pay with your savings you are losing the growth &nbsp;that the amount would have gained if you put that in the market. &nbsp;Your growth in the ROTH if you did this would have to be high enough to &nbsp;overcome &nbsp;the growth of keeping it in the 401k minus the take you pay when you convert or withdraw in your later year which most like in your retirement years where your tax bracket is lower. I&apos;m not 100% sure this will work.... I&apos;d have to see numbers calculated.

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