About this video

• Video Title: Why Retirees With Under $5M Should Avoid Roth Conversions
• Channel: Eric at The PeakFP
• Speakers: Eric Amselog
• Duration: 00:13:20

Overview

This video argues that Roth conversions are often presented with overly optimistic projections that assume unrealistically long lifespans. The speaker, Eric Amselog, a certified financial planner, uses case studies with $1 million, $3 million, and $5 million portfolios to demonstrate how shortening the assumed retirement period significantly alters and diminishes the projected benefits of Roth conversions, highlighting them as a gamble rather than a sure strategy.

Key takeaways

• Roth conversions are often recommended by financial software and advisors, with projections showing significant tax savings and increased net spending money in retirement.
• These projections typically assume very long lifespans, which are statistically unlikely for most individuals.
• By shortening the assumed retirement duration in financial models, the projected benefits of Roth conversions are dramatically reduced or even eliminated, revealing them to be a gamble on longevity.
• Actual survival data suggests that a significant portion of Roth conversions may fail to yield benefits because individuals do not live long enough to surpass the break-even point.
• There are several hidden risks associated with Roth conversions, including the gamble on returns, potential future tax bracket changes for heirs, the disregard for the time value of money, and increased withdrawal rate risk impacting early retirement quality of life.
• A checklist is provided to help retirees determine if Roth conversions are suitable based on their savings amount, expected retirement income, ability to cover conversion costs, and potential risks like widow penalties or future RMDs.