Let’s break down how to avoid the pitfalls—and how one couple, Bob and Sally, turned a good Roth conversion strategy into a great one.

1. Roth Conversions and Tax Bracket Management

Many advisors recommend doing Roth conversions up to a certain tax bracket—like 10%, 12%, or 22%—to “fill the bucket” without spilling over into higher brackets like 24% or 32%.

Why? Because later in retirement, Required Minimum Distributions (RMDs) can push you into a higher tax bracket. That’s exactly what was projected to happen for Bob and Sally. Converting early at a lower rate would reduce their taxable IRA balances and lower future RMDs.

Initially, they planned to convert up to the 22% bracket. This approach saved them an estimated $485,000 in tax-adjusted portfolio value by age 90—already a win. But it could’ve been better.

2. Beware of the IRMA Surcharge Trap

What Bob and Sally didn’t expect? Their Roth conversions bumped their Modified Adjusted Gross Income (MAGI) just $1 over the IRMA threshold—triggering higher Medicare premiums.

The Income-Related Monthly Adjustment Amount (IRMAA) increased their Medicare Part B and D costs by $5,828 annually.

But that’s not all. Because they had to withdraw extra funds from their IRA to cover those healthcare surcharges, the opportunity cost over 25 years was an estimated $47,000 in lost investment growth.

Just one dollar over the limit created a compounding penalty that turned a good tax strategy into an expensive oversight.

3. A Better Strategy: Stay Below IRMA

Once they revised their approach and aimed just under the IRMA threshold, Bob and Sally saw huge gains.

Instead of converting all the way to the 22% tax bracket, they converted slightly less—but avoided IRMA surcharges. That small adjustment increased their projected portfolio value from $485,000 to $760,000.

Why the jump?

• Lower healthcare costs
• More assets left in their accounts to compound
• Better overall tax efficiency

Sometimes converting less can mean keeping more.

4. The Other Hidden Taxes of Roth Conversions

IRMA surcharges aren’t the only danger. A Roth conversion also affects:

• Social Security “tax torpedo”: Increases in provisional income can make up to 85% of your Social Security benefits taxable.
• Capital gains taxes: Higher MAGI can push long-term capital gains and dividends from 0% to 15% or even 20%.
• Your heirs’ tax brackets: If your beneficiaries are in lower tax brackets, they might have paid less tax on inherited traditional IRA dollars than you will converting them now.

Every tax lever affects another—and ignoring that can lead to thousands lost.

5. The Case for Comprehensive Roth Planning

Smart Roth conversion planning involves more than just your current tax bracket. It means understanding:

• IRMA thresholds
• Social Security taxation
• Capital gains interaction
• Future tax rates for your heirs
• Portfolio growth expectations
• Medicare costs

Many retirees benefit from using retirement planning software or working with a financial planner who models these interactions. At the very least, understanding where each tax trap lives on the map gives you a fighting chance.

6. Final Takeaways

If you’re doing Roth conversions—or thinking about them—keep these takeaways in mind:

• Roth conversions are powerful, but precision matters.
• IRMA surcharges can turn small missteps into expensive, recurring costs.
• Consider all the tax interactions, not just income taxes.
• Legacy planning and Medicare costs should factor into your strategy.
• A little foresight could mean hundreds of thousands in extra retirement dollars.

The right Roth strategy is less about brute force and more about finesse. Get it right, and your future self—and your heirs—will thank you.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

The post The Hidden Traps of Roth Conversions: How to Maximize Tax-Free Retirement Without Triggering Costly Surprises appeared first on ROI TV.

In this Money Makeover session, financial experts we broke down how to build a stronger retirement plan that balances smart saving, smart spending, and smart investing.

Here’s what you need to know to get your finances makeover-ready.

1. Retirement Planning Starts with Setting Clear Goals

Many people enter retirement without a clear plan—and it shows.

• Between 2016 and 2021, the average retiree’s monthly expenses rose by $1,000.
• 49% of retirees spend more than they anticipated.
• Retirement often feels like “Saturday every day,” leading to more discretionary spending.

The first step: get clear on your goals.
When do you want to retire?
How much do you want to spend?
Do you plan to travel, buy a second home, or fund grandkids’ education?

Answering these questions is the foundation of a sustainable retirement plan.

2. Budgeting: Needs First, Wants Later

Americans are currently spending $7,400 more per year than they earn—a dangerous trend.

A simple rule can help you stay on track:

• 50% of income for needs (housing, healthcare, food)
• 20% for savings
• 30% for wants (travel, hobbies, entertainment)

Following this structure before and during retirement helps prevent lifestyle inflation and debt accumulation.

3. Retirement Savings: Employer Matches and Beyond

Good news: 52% of employees are now saving above their employer’s match.

Vanguard’s study shows that raising your contribution rate even a little each year makes a huge difference.

• Saving 2% of your salary could grow to $119,000.
• Saving 6% could grow to $356,000—nearly triple.

Aim for 15%–20% of your annual income if possible. And always grab the full employer match—it’s free money.

4. Tax Planning: Take Advantage of Current Low Rates

Tax brackets are expected to rise in 2026:

• 22% bracket → 25%
• 24% bracket → 28%
• 32% bracket → 33%

Use today’s lower brackets to your advantage:

• Convert traditional IRA funds to Roth IRAs
• Diversify your retirement income streams
• Invest aggressively in Roth IRAs for tax-free growth

Roth conversions might cause a short-term tax hit—but they can save you tens (or hundreds) of thousands over a lifetime.

5. Consolidate Accounts to Simplify Life

Many retirees have a hodgepodge of accounts—old 401(k)s, IRAs, brokerage accounts.

Consolidating can:

• Reduce management headaches
• Lower fees
• Simplify required minimum distributions (RMDs)
• Make tax filing easier

Consider using low-cost custodians and ETFs to streamline your investments even further.

6. Avoid Early IRA Withdrawals

Need cash? Think twice before tapping your IRA early.

Pulling out $100,000 before age 59½ could cost you $38,000 in taxes and penalties. Worse, that lost money could have grown into hundreds of thousands if left invested.

Build an emergency fund and short-term savings outside of retirement accounts to avoid costly withdrawals.

7. Stress Test Your Retirement Plan

Case studies like John and Sally (age 57) show how easily a plan can fall apart without proper testing.

Their original strategy depleted funds by age 82.
But by working a few more years, saving more aggressively, or reducing discretionary spending, they could extend their nest egg through their entire lifetimes.

Stress testing helps you uncover weak points—and fix them before it’s too late.

8. Use Financial Tools and Get Educated

• Budget templates
• Retirement calculators
• Portfolio risk assessments
• Tax planning strategies

Financial education and action go hand in hand. The more you understand your money, the better decisions you’ll make for your future.

Final Thoughts: Your Retirement, Your Rules

A great retirement isn’t just about how much money you have—it’s about having a plan that aligns with your goals, your values, and your vision for life after work.

With the right mix of saving, spending, investing, and tax planning, you can enjoy the retirement you’ve earned without unnecessary stress.

Start your financial makeover today—you deserve it.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post The Ultimate Money Makeover: Retirement Planning Strategies to Secure Your Future appeared first on ROI TV.