THE NEW HOLISTIC RETIREMENT • 83 Like in our previous example, converting to a Roth IR A would he lp Mart y sa ve tax es in t he long run. Sin ce t he Rot h conversion woul d occur at today’s tax rates (i n Marty’s case , an estimated 25 percent ), t he Rot h anal ysis does not cha nge: Marty would sti ll owe $175,000 in taxes if he converted these fu nds t o a tax- free Roth acco unt. Summary: Total Potential Taxes Owed $700,000 IRA | 5% Pre-Tax Growth Rate
Taxes Stay the Same
Taxes Rise
$492,000
$624,000
Example shown for illustrative purposes only and are not guaranteed. Now , Marty’ s choices have become even clearer: He coul d pay $624,000 in potential taxes if he maintains his IRA int o the future and $175,000 i n potenti al taxes if he converts it to a Roth IRA. In this example, in a rising tax environment, Marty is projected to pay $449,000 in optional taxes if he makes no changes. Now you can see w hy Mart y tol d us st aying put was n’t a n option. Your Long Game Approach to Taxes This analysis is why we believe taxes are the most pressing— and le as t und erstood— of the l ong game risks. Many savers have portfolios th at are diversified to protect the m fro m market risk. Many also have annuities or other strat egies t o protect the m fro m income risk.
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