Am I too old for Roth conversions? I’m 84 and my wife is 77. We have $8 million saved.
“We are reluctant to pay a financial adviser 2% of assets — roughly $160,000 per year.”
The couple's concern about fees is understandable, especially given their significant savings. Paying 2% of assets annually can be a substantial expense, eating into their returns over time. For high-net-worth individuals like this couple, it's essential to weigh the benefits of professional advice against the costs. A good financial adviser can help optimize their financial situation, including potential tax savings through strategies like Roth conversions.
Roth conversions can be a valuable tool for managing taxes in retirement, but the decision to pursue them at 84 and 77 is complex. Converting traditional IRA or 401(k) assets to a Roth IRA can provide tax-free growth and withdrawals in retirement, but it also requires paying taxes on the converted amount upfront. Given their age, the couple should consider their life expectancy, current tax situation, and required minimum distributions (RMDs) when deciding whether a Roth conversion makes sense. It's also worth noting that Roth conversions can be done in installments, which might help manage the tax impact.
To watch next: The couple should consider consulting a fee-only financial adviser or a tax professional who can provide guidance on Roth conversions and other tax optimization strategies. They may also want to explore alternative fee structures, such as hourly or project-based fees, which can be more cost-effective than a traditional 2% assets-under-management fee. Additionally, they should review their overall financial plan, including estate planning, tax planning, and income strategy, to ensure they're making the most of their $8 million in savings.
Originally reported by marketwatch.com. ExpoNews adds analysis for finance & markets readers.