Are Roth Conversions Worth It at 84 With $8M Saved?
An elderly couple with $8 million questions whether Roth conversions still make sense and whether a 2% adviser fee is justified.
The question of whether Roth conversions remain a useful tax-planning tool in one's eighties is one that more affluent retirees are confronting as longevity extends and estate-planning priorities evolve. A couple — aged 84 and 77 — with $8 million in savings recently raised this dilemma publicly, and the underlying tension in their situation speaks to a broader challenge: at what point does the math on Roth conversions stop working in your favor?
The core logic of a Roth conversion is that you pay income taxes now, at a known rate, so that future growth accumulates tax-free and heirs inherit assets without an immediate tax burden. For most retirees in their eighties, the calculus depends heavily on several factors: current marginal tax rates, projected required minimum distributions, the time horizon for the converted funds to grow, and whether the primary beneficiaries are individuals who would face high tax rates on inherited traditional IRA withdrawals.
Read more The Social Security Claiming Strategy Boomers Had That's Gone for Most Now →
At $8 million in assets, this couple almost certainly faces sizable required minimum distributions from traditional retirement accounts, which can push them into the highest federal tax brackets. Converting additional funds to a Roth on top of those RMDs could amplify the tax hit significantly in any given year. However, if a meaningful portion of those assets are intended for adult children in high-earning years, the estate-planning argument for conversion remains compelling — heirs inheriting a Roth IRA can potentially access decades of tax-free growth.
The couple's hesitation over paying a financial adviser 2% of assets — approximately $160,000 annually — is equally telling. At that asset level, a fee-only adviser charging a flat or hourly rate would almost certainly represent far better value. The 2% AUM model, widely standard for smaller portfolios, becomes increasingly difficult to justify as wealth scales, since the complexity of advice does not grow proportionally with assets under management. For an $8 million portfolio, many fee-only planners would provide comprehensive tax and estate guidance for a fraction of that figure.
The intersection of Roth conversion strategy and adviser cost is not incidental here — the right professional, at the right price, is precisely what would help a couple of this complexity model out the generational tax implications of their options. Continue reading at MarketWatch.com
