Blog | CB Investment Management

The Retirement Tax Trap. Big IRA? Urgent Action Required.

“By taking advantage of loopholes in Roth conversion laws and making shrewd investments using Roth money, whose capital gains are never taxed, “the accounts have morphed into supercharged investment vehicles subsidized by American taxpayers,” ProPublica reported.

At the end of 2018, Warren Buffett had $20.2 million in his Roth account, according to the report. His top lieutenant at Berkshire Hathaway, Ted Weschler, had $264.4 million in his Roth account. In an extreme example, Peter Thiel, the billionaire venture capitalist, had amassed $5 billion in his Roth by 2019 across 96 subaccounts.”

Your taxes will very likely be your biggest expense through your retirement. The sooner you get on top of this issue the less you will pay, and the clearer you will be about your finances through retirement.

Everyone’s circumstances are different but the scale of the savings will surprise you and can run to a million dollars or more for investors with substantial IRA’s. As you can see from what the wealthiest and smartest investors are doing this makes a major difference to your long term financial situation. Once you understand the benefits you will very likely want to take immediate action.

The starting point is to ensure that you have Best Practice advice and software. It is crucial that you are guided by sound math and data, and then skilled advice. Vague opinions and assumptions will not serve you well, as they will likely lead you in a suboptimal direction.

Your own Best Practice requires immediate attention to comprehensive retirement and tax planning once you reach age 60, at the latest. The later you address this issue the less effectively you will be able to optimize your taxes. Often the best financial solution will require a series of transactions over a period of years. The sooner you start the better as you can spread out and minimize the tax transfer expenses.


CB Investment Management offers a series of steps for investors to get on top of this opportunity. The primary purpose of this program is to ensure investors have a clear pathway to exploring and understanding what fully optimizing their retirement could mean for their own retirement.



Just a few simple steps:

  1. A free initial retirement review of your own individual circumstances.
  2. A free assessment of your retirement tax and IRMAA situation. In addition a few practical steps you can take over time to improve your situation. If, however, more detail is required because you are likely to be at risk and would benefit from a more detailed assessment, I would recommend the next step.
  3. A mathematical analysis of your full retirement tax and IRMAA outlook were you to take no further action, as designed by the IRMAA certification website. 
  4. If you choose to take further action I will review my own services, as well as at least one other alternative service, so you can consider your best option.
  5. The final step would involve a comprehensive Maxifi optimization program.


The purpose of this Insight is to expand the awareness of what could be at stake for you through your retirement. Quite simply, until you have complete clarity on this issue, you won’t have a credible or optimal retirement plan.

 Avoid the RMD and IRMAA Income Collapse In Your Late 70s. Make an assessment now.

A good starting point is to understand what will happen to your retirement when you start taking your Required Minimum Distributions from your IRA in your 70s. This can set off a sequence of alarming declines in your income.

What you see, at that time, is suddenly much higher taxable income and a double hit from both higher income tax and also higher Medicare premiums, through the IRMAA rules. At that time, it is harder to avoid higher taxes.

With the right software and advice, you can immediately make a crucial assessment about this right now. Then you will be able to find out ways to head off or at least minimize your taxes.

This video well describes what will happen to your income over the lifetime of your retirement.


There are a number of solutions to this problem if action is taken in a timely manner. The math here concentrates on Roth Conversions, which is typically the main path chosen.

What is a Roth?

  1. Zero RMDs on Roth IRAs
  2. Zero tax on future gains
  3. Zero tax on income
  4. Zero tax on distributions
  5. Zero income tax to heirs.

Counter Intuitive Conclusion

Your analysis of this issue must be math and data driven. The action that is likely to be recommended will likely at first appear to be counter intuitive. The way to a better long term retirement with much lower overall taxes, will likely be through initially much higher taxes with accelerating Roth Conversions.

Over time the higher the proportion of your assets that are free of tax, the lower your lifetime taxes will become. This is of necessity a mathematical issue. It is crucial that you trust and respect what the math is telling you.

Why does the math promote accelerated tax payments?

To many it is standard procedure, as a first reaction, to delay paying taxes for as long as possible. If not, then at least to accelerate taxes only a little. In most Roth conversions both approaches are usually suboptimal. That does not mean that maximizing the payments is the right way to go either. Good software will give you the optimal answer. Let the data speak for itself.

Get the facts right with math. Don’t be distracted by opinion. This will likely lead to:

  1. Poor opinions
  2. Ineffective action.
  3. Inefficient results.

Once you get to 59 ½ then there is some significant math for you to do. At that age there is no longer a penalty for withdrawing from your IRA. Now you can rearrange your retirement assets to optimize the withdrawal taxes from your IRA. This may be the most important action you can take to optimize your financial situation.

Why and how do Roth Conversions work?

The numbers below are offered as a guide, and show what happens if there is no Conversion, compared to a single Conversion.

No Conversion                                                           Conversion

100,000                                                                       100,000

12 years at 6%                                                            25% Taxes paid

$200.000 statement value                                       $75,000

25% taxes owe                                                           12 years at 6%

150,000 real value all taxable                                  150,000 tax-free value

So after 12 years the same value has become tax free! The converted money has grown and will never pay tax.

To get a fuller picture, here is an example (from Craig Wear) of the overall outcome from an optimized series of annual conversions. This shows that gradual small increases in conversions can help but is nowhere close to optimal. The scale of total tax savings is remarkably beneficial at 1,784,828, which would be free of tax to beneficiaries.

                            No Conversion   Conversions up to current tax rate   Optimal strategy

Projected RMD            2,835,698                            1,306,369                            38,181

Projected Medicare        367,301                                324,176                        232,360

Tax Avoidance                     none                               459.029                       1,784,828           

In this long term case. The optimal strategy saves 1,784,828 in taxes! A significant proportion of your entire IRA.

Taxes are currently relatively low and are likely to rise. Any delay in Roth Conversions will likely raise the cost as well as delay the benefits of increased tax free assets.

Roth conversions are one of the most important financial decisions. Make sure you do a thorough job and consult an Adviser that understands how to execute best practice.

Best Practice is a matter of your Best Interest.

Education and a Commitment to Informed Consent is an Obligation.

Chris Belchamber is an IRMAA Certified Planner

Medicare’s IRMAA impacts every retirement plan. Learning how to mitigate it is available via IRMAA Certified Planners designation.

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