Roth Conversions Are About to Get MUCH More Expensive | The Limitless Retirement Podcast

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Are you sitting on a ticking tax time bomb? Danny Gudorf issues an urgent call to action for individuals aged 60 to 70 holding substantial IRA or 401k balances. He argues that with the national debt crisis threatening significant tax hikes, now is the moment to act decisively to protect your retirement savings. Gudorf outlines the irresistible benefits of Roth conversions during this fleeting period of lower tax rates, illustrating how proactive planning can lead to massive financial gains. Don't let your golden years be overshadowed by unforeseen tax burdens—Gudorf insists that tailored tax strategies are non-negotiable for a secure financial future.

Roth Conversions Are About to Get Much More Expensive

Are you unknowingly sitting on a retirement tax bomb that could blow a massive hole in your future wealth?

If you’re between 60 and 70 years old with a healthy 401(k) or IRA balance, you’re facing a hidden threat that could quietly rob you—and your heirs—of hundreds of thousands of dollars. And here’s the twist: the most powerful retirement planning strategy of the last decade is about to lose much of its effectiveness.

The clock is ticking, and your opportunity to act could be gone in just a few short years.

Key Takeaways

  • Many retirees are unaware of the hidden tax threats to their retirement.
  • The U.S. federal deficit is spiraling out of control, leading to potential tax increases.
  • Retirees with large retirement accounts may find themselves in higher tax brackets due to required minimum distributions.
  • Historical tax rates were much higher, and a return to those levels is possible.
  • The current political environment may extend low tax rates temporarily, but significant increases are inevitable.
  • Roth conversions can lead to substantial tax savings if done before rates increase.
  • The window for taking advantage of low tax rates is limited to a few years.
  • Conventional wisdom suggests waiting until retirement for Roth conversions, but this may not be the best strategy.
  • Every dollar converted during low tax rates is a dollar that will never be taxed again.
  • Personalized tax planning is essential for maximizing retirement savings.

Two Massive Forces Colliding

We’re at a financial crossroads unlike anything in U.S. history.

On one side, the federal deficit is spiraling out of control. Researchers at the Wharton School have identified only two ways to address this debt crisis:

  1. Cut $2 trillion from the federal budget (politically and practically unrealistic).

  2. Permanently increase all federal taxes by 33%—immediately.

The first option simply isn’t going to happen. That leaves the second—and it’s not a question of if, but when.

Here’s what most people miss: even if you think tax hikes will only target “the rich,” if you have a large 401(k) or IRA, you’re likely to end up in those higher tax brackets in retirement—often without realizing it until it’s too late.

Why You Might Be Paying More Than You Think

If you’ve saved diligently and built a seven-figure nest egg, required minimum distributions (RMDs) will eventually force you to withdraw money whether you need it or not. Those withdrawals often push retirees into the 25%, 28%, or even 32% federal tax brackets.

Now imagine those same brackets jumping by one-third—something the U.S. has experienced before. In the early 1980s, effective tax rates were indeed about 33% higher than they are today. And compared to many developed nations—Canada, the UK, Australia, the Netherlands—we’re still at historically low tax levels.

The Second Force: Temporary Low Tax Rates

Right now, we’re enjoying one of the lowest tax rate environments in U.S. history, thanks to legislation passed in 2016. But this won’t last.

  • Current rates expire at the end of 2025 and will revert to 2017 levels.

  • Political momentum suggests they’ll likely be extended for 2–4 more years.

  • After that, the debt crisis will overpower politics, and tax rates will likely spike sharply.

That gives you maybe three to four years—max—before the window closes. And the difference between acting now and waiting could be enormous.

A Real-World Example

Consider a couple, age 62, planning to retire at 65. They have $1.5 million in combined 401(k) and IRA balances—none of which has ever been taxed.

If they do nothing, they’ll pay roughly $1.6 million in federal taxes over their lifetime, including what their children will owe when they inherit the accounts.

If they start Roth conversions only after retirement, they’ll pay around $694,000—saving $834,000 versus doing nothing.

But if they start Roth conversions now, before tax rates rise:

  • Under current rates: they save $1.1 million compared to doing nothing.

  • If rates increase by 33%: they save $1.5 million—an extra $400,000 compared to waiting.

Even if the tax hike never materializes, they’re still over $1 million ahead.

Why Acting Now Matters

Every dollar you convert to a Roth during this low-tax window is a dollar that will never be taxed again—no matter how high rates go. That money grows tax-free forever, and your heirs inherit it tax-free as well.

The strategy tends to work best for those between 60 and RMD age, especially if you’re still working or have significant retirement balances. Contrary to popular belief, waiting until your income drops in retirement isn’t always the smartest move—especially if tax rates are headed upward.

The Bottom Line

  • The debt crisis is real and mathematically unavoidable.

  • Tax hikes are coming—the only uncertainty is timing.

  • Low rates are temporary—you have maybe 3–4 years to act.

  • The difference between converting now versus later can be hundreds of thousands of dollars.

But Roth conversions aren’t one-size-fits-all. The strategy must be tailored to your specific retirement plan, income, and tax situation.

Your Next Step

If you have a substantial retirement account and want to explore how much you could save by converting now, don’t wait. The sooner you run the numbers for your specific situation, the more options you’ll have—and the more you stand to keep in your pocket instead of sending to the IRS.

Act before the window closes.

*This blog post is based on the insights shared by Gudorf Financial Group. For personalized advice tailored to your unique circumstances, always consult a financial, legal, or tax professional.*

Transcript: Prefer to Read — Click to Open

Danny Gudorf (00:14.414)

Are you sitting on a retirement tax bomb that could explode and cost you hundreds of thousands of dollars? If you’re between 60 and 70 with a solid 401k or IRA balance, there’s a hidden threat to your retirement that almost nobody is talking about. The most powerful retirement planning strategy I’ve used over the last decade is about to become much more less effective, and you have a very narrow window.

take advantage before it closes forever. Hey there, I’m Danny Gudorf a financial planner who specializes in helping people over 50 retire with confidence. And what I’m about to share could save you more money than any other financial decision you make in your lifetime. We’ve arrived at a crossroads unlike anything we’ve seen in American history. Two massive forces are colliding to create both a crisis and an opportunity.

On one side, we have the United States federal deficit spiraling completely out of control. Researchers at Wharton have made it crystal clear that the escalating debt problem has put us on a path for financial devastation. The world’s entire financial system literally rests on the shoulders of the United States, and the numbers are not good. Here’s what most people don’t understand about our debt crisis.

Wharton has identified only two ways to fix this massive problem. Option one is cutting about $2 trillion out of the federal budget. Option two, and I’m quoting directly from their research, requires an immediate and permanent increase of 33 % on all federal taxes. Let me be clear with you. Cutting $2 trillion from the federal budget is simply not going to happen. The only realistic path

Tackling this debt crisis is through increased tax revenue, which means much higher taxes for everyone.

Danny Gudorf (02:22.86)

Now, if you have a million dollars or more in your 401k or IRA, you need to understand something that’s critical. Most retirees correctly assume that when lawmakers want to increase taxes, they’re going to go after people in the higher tax brackets. But here’s what problem you don’t realize. If you have a large retirement account, you’re going to be

one of those people in the higher brackets, and you usually don’t figure this out until it’s too late. Retirees with substantial 401k or IRA balances typically find themselves in the 25, 28, or even 32 % tax bracket during retirement. This mainly happens because of required minimum distributions that force you to draw money from your retirement accounts whether you need it or not. When I explain this to clients,

that we could see a 33 % tax increase, many people think that that sounds impossible. But we were already there just 45 years ago. Effective tax rates in the United States were about 33 % higher in the early 1980s. Compare us to other developed nations and you’ll see we actually have one of the lowest tax burdens of any developed country. Canada, the UK,

and Australia and the Netherlands as well as many parts of Europe have much higher taxes than we do. So a 33 % increase would simply bring us in line with what other countries already pay. The second force that’s creating this unique situation is our current political environment. The administration campaigned heavily on keeping taxes low and they’ve proven that when they commit to this idea

they’re going to follow through on it. I don’t see any scenario given the makeup of Congress where they don’t extend our current historically low tax rates. This creates a very specific and limited window of opportunity that we’ve never seen before. Let me show you exactly what this means for your retirement planning.

Danny Gudorf (04:45.656)

We’re currently enjoying one of the lowest tax rates in American history because of the legislation that went into effect in 2016. You can see that tax rates have been gradually declining over the past 45 years. When tax rates were much higher in the 1980s, our debt to GDP ratio was only 33%. That was manageable. Today, that ratio has explored to dangerous levels.

and is projected to reach 135 % of GDP. Here’s the critical point though. These low tax rates are scheduled to expire at the end of 2025 and would revert back to the 2017 levels. However, the current administration is going to extend these low rates for at least another two or four years. But here’s what’s going to happen next. The debt crisis

Trump’s political agenda. No matter who is in office, this debt problem has to be addressed. And that means significant higher taxes are coming. Whether that’s four or five years from now or 10 years from now, we know that at some point they’re coming. This creates an incredibly narrow window of opportunity. We may have maybe three or four years while the tax rates remain at these historically low levels.

before they shoot up dramatically. Most financial planning software doesn’t account for this reality. The software assumes gradual tax increases, but that’s not what’s going to happen. We’re going to be looking at potentially a sharp spike in tax rates once this window closes. Let me give you a real example of what this means. Take a couple who just turned 62 and plan to work until 65.

They’ve done a great job of saving and have about $1.5 million in their 401k and IRA accounts. Remember, none of this money has ever been taxed, but by the time they pass away, they’ll likely leave about $1.5 million to their children, and that money will still have never been taxed. If this couple does nothing and never does a Roth conversion, they’ll pay tax

Danny Gudorf (07:09.294)

on about $1.5 million and federal

Danny Gudorf (07:34.318)

If this couple does nothing and never does a Roth conversion, they’ll pay about $1.5 million in federal taxes over their co-

Danny Gudorf (08:06.508)

that last part.

Danny Gudorf (08:14.838)

Now by the time they pass away, depending on how their retirement went, they’re going to have probably at least that $1.5 million or more that are going to be left to their children. And that money also has still never been taxed. If this couple does nothing and never does a Roth conversion, they’ll pay about $1.6 million of federal taxes over their entire lifetime. That includes both what they pay

and what their children will pay on inheriDanny IRA accounts. If they wait until retirement to start Roth conversions, they’ll pay about $694,000 in taxes, saving roughly $834,000 in taxes compared to doing nothing. But here is where it gets really interesting. If they starDanny Roth conversions now, even while they’re still working,

and take advantage of this narrow window of low tax rates, the savings become enormous. Under current tax rates, starting conversions now saves them about $1.1 million compared to doing nothing. But if the tax rates increase by 33 % as projecDanny, starting conversions during this window saves them about $1.5 million. That’s a $400,000 difference

between starting conversions now versus waiting until after tax rates increase. Even if I’m completely wrong about tax rate increases and how things are going to play out, this family still saves over a million dollars by doing conversions during this window. But if I’m right about what’s coming, they’ll save an additional $400,000 in taxes by acting now instead of waiting.

is compelling regardless of what happens with tax policy. In the worst case scenario where taxes don’t increase at all, Roth conversions for this family during this window save about $1.1 million. In the likely scenario where taxes do increase significantly, the savings jumps up. That’s a double repeat. Cut that last part out.

Danny Gudorf (10:39.618)

Here’s what makes the situation unique. I’ve been doing retirement planning for over 15 years and I’ve seen taxes go up and taxes go down, but I’ve never seen the United States in a situation like we’re in today. The combination of massive debt and temporary low tax rates creates a perfect storm of opportunity that won’t last long. The window for taking advantage of these low rates is probably

three or four years at most. The opportunity generally

Danny Gudorf (11:18.21)

This opportunity generally works best for people around age 60 and continues until you start taking Social Security and then up until RMD age. If you’re still working or have substantial retirement account balances, you need to seriously consider starting conversions now rather than waiting until retirement. Most people think they should wait until they retire to do Roth conversions because their income will be lower.

But that conventional wisdom doesn’t account for what’s happening with potentially tax rates. Starting conversions now while you’re still working, even at higher current income levels, can sometimes save hundreds of thousands of dollars if tax rates are going up. The key though is to understand that this isn’t actually just about one year of taxes. This is about your entire retirement tax planning strategy.

Every dollar you convert in lower tax rates during this window is a dollar that will never be taxed again, no matter how high tax rates go in the future. Your converted Roth money grows tax free forever, and your heirs will inherit it tax free as well. Remember, the debt crisis isn’t going away and political agendas change, but mathematically, realities do not.

The United States has to address the debt problem and the only realistic solution is to raise taxes. That means higher tax rates for everyone, especially people with substantial retirement accounts. The window of opportunity is real, but it’s limited and closing. Whether you believe tax rates will increase dramatically or stay relatively stable, the math strongly favors taking action during this period. The difference between acting now

and waiting could literally be hundreds of thousands of dollars. But it’s important to remember that even though there is really good opportunity right now, Roth conversions do not make sense for everyone. You have to explore your unique specific scenario and develop a tax plan that is going to do best what’s

Danny Gudorf (13:39.352)

You have to develop a tax plan that is going to be what’s best for your family’s specific situation.

Danny Gudorf (14:05.486)

you

Danny Gudorf (14:17.974)

And if you’re out of that, scratch that.

And if you’re older than those individuals in that 60 to 70 year old window, check out my next video, which is, should you do a Roth conversion in your 70s? This goes through three main things that you should be thinking about if you’re over 70 and considering Roth conversion.

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