The "Leveraged" Roth Conversion Concept | National Annuity Educators

Meet The “Leveraged” Roth Conversion: The Coolest Roth Conversion Idea You’ve Probably Never Thought About

QUESTION: What if you could convert a portion of your IRA today and watch it grow into a tax-free powerhouse, ready to support your retirement, long-term care needs, and your heirs—all while eliminating RMDs forever?

What if we told you there’s a simple & affordable Roth IRA conversion strategy that could:

Generate a much larger retirement income from your traditional IRA than Required Minimum Distributions (RMDs) even demand (assuming more income is appealing to you).
Produce an increasing lifetime income stream over the next 20+ years, while effectively zeroing the taxable portion of your IRA out of your estate completely.
But at the same time. allow you to re-grow and recover your entire current IRA balance “at the other end” completely tax-free and RMD-free - ultimately passing it to your heirs without any income tax burden whatsoever.

Sounds intriguing, doesn’t it?

This article will show you how this strategy is not only possible but also far simpler and more cost-effective than you might expect.

The Biggest Roth Conversion Misconceptions

Many people hesitate to explore Roth conversions because they mistakenly view them as an “all-or-nothing” move. The assumption is that converting a full IRA balance means facing an overwhelming tax bill—seemingly too expensive to consider.

On top of that, a common mistake is paying conversion taxes from the IRA balance itself instead of using non-qualified cash reserves. This misstep not only reduces the amount converted but also undermines the Roth IRA’s long-term tax-free growth potential.

That’s where the concept of a “Leveraged” Roth Conversion changes everything.

This strategy leverages two key principles:

Paying conversion taxes with cash reserves outside the IRA (if available).
Only converting as much principal to a Roth as would be required to regrow your entire current balance over a desired time frame of your choosing (15, 20, or even 25 years) thereby letting time and compounding interest/growth do most of the “heavy lifting” -- instead of you paying a whopping amount of conversion taxes trying to convert the whole thing up front.

Did we lose you? Just hang in there with us and let us break it down even more simply…

What Makes This Roth Conversion Strategy Different? One Simple Question Unlocks the Answer:

It all starts with this rhetorical question: “How much of my current IRA balance would I need to convert today, reinvest at a realistic return, and let grow tax-free in order to fully regrow my entire current balance over the next 15–20 years?”

This is where the math becomes both fascinating and empowering.

By applying present value calculations over a realistic time horizon, you’ll see just how small a fraction of your IRA could be enough to achieve this goal.

A Practical Example Using Present Value Tables

Let’s break it down with a simple calculation. Imagine a $1 million IRA balance (just cause it’s an easy round number to work with.) The goal isn’t to focus on the dollar amount—it’s the percentage of the balance you’d need to convert today to regrow that amount tax-free that is so important.

Here’s how it works. Using realistic growth assumptions and time horizons, we’ll identify the “sweet spot” for your conversion strategy.

Starting with a $1 million traditional IRA today, here is how much you’d have to convert now, at the following time horizon and growth rates, in order to completely re-grow your current balance tax-free inside a Roth IRA at the other end:

Let’s Apply the Numbers to a Real-World Example

Example: A 60-Year-Old with a $1 Million IRA

Using the 20-year horizon table at an 8% growth rate:

Percentage to Convert: 21.4%
Dollar Amount to Convert: $214,000

The best part? This $214,000 conversion doesn’t have to happen all at once. You can split it over two or more calendar years to stay within favorable tax brackets.

The Up-Fron Tax Cost

Let’s assume this individual splits the conversion evenly over two years ($107,000 per year) and stays within a 20% marginal tax bracket:

Taxes Owed: $42,800 (paid from non-IRA cash reserves).

This one-time tax cost ensures that the $214,000 Roth IRA balance grows tax-free from now on. Over the next 20 years, the Roth regrows to $1 million—completely shielded from RMDs and income taxes.

What Happens Without the Roth Conversion?

If the $1 million IRA were passed down as a taxable account:

Heirs would face taxes on withdrawals based on their marginal tax rates, potentially losing $250,000–$370,000 or more to income taxes.

Why This Strategy Works

By converting a portion of the IRA today and paying taxes upfront:

You avoid future taxes on growth and withdrawals, letting the Roth recover the original balance tax-free.
You eliminate RMDs on the growing Roth IRA.
You leave behind a tax-free legacy for your heirs.

Who wouldn’t spend $42,800 now to protect and pass down $1 million tax-free?

Another Practical Example

Maybe you’re thinking:

"I’m 65, with a $712,768 IRA. I’m comfortable assuming an 8% return in a low-cost index fund, but I want to regrow my balance tax-free in just 15 years (not 20). How much would I need to convert today?"

Here’s how to calculate it:

Look at the 15-Year Horizon Chart
- For an 8% growth assumption, the table shows a 27.6% conversion percentage.
Apply the Percentage to Your Balance
- $712,768 × 0.276 = $196,722.

You would need to convert $196,722 upfront to regrow your entire $712,768 balance tax-free by age 80.

This approach is flexible for any combination of time horizons, growth rates, and IRA balances. The table acts as your cheat sheet for building a tax-free retirement legacy.

One More Powerful Benefit to This Approach Worth Considering

There’s an often-overlooked advantage to this Roth conversion strategy: the potential to use your tax-free Roth IRA as a long-term care safety net.

Let’s face it—nobody wants to move into a nursing home. Most people would much rather have skilled care brought to them in the comfort and safety of their own home. However, in-home care is one of the most expensive forms of long-term care available.

Now, imagine this: right around the time you hit the statistical age where long-term care needs typically arise, your Roth IRA has fully recovered your original balance tax-free and RMD-free.

You’d have the ability to access as much as you want (say, several hundred thousand dollars—if needed) tax-free, without creating any negative impact on your other household assets or income streams - or impacting your tax return - at all! That's a pretty big advantage, wouldn't you agree?

Unlike traditional long-term care insurance, which requires expensive premiums and offers no guarantees of use, a Roth IRA offers unmatched flexibility:

If you need it, the funds are there—tax-free and ready to support your care needs.
If you don’t need it, you haven’t wasted years of premiums. Instead, the untouched Roth IRA balance becomes a powerful tax-free legacy for your heirs, ensuring your life savings go to the people you care about most—not Uncle Sam.

This dual-purpose benefit—providing both a long-term care safety net and a tax-free inheritance—makes the Roth conversion strategy an even more compelling part of a comprehensive retirement plan.

Ready to Build Your Tax-Free Legacy?

A Roth conversion isn’t just about tax efficiency—it’s about creating options, flexibility, and peace of mind for your future.

The Ultimate Outcome:

A fully recovered Roth IRA balance tax-free and ready for long-term care needs if required.
Guaranteed income streams from an annuity ladder, ensuring your other financial needs are covered.
A tax-free legacy that leaves your life savings to your loved ones—not Uncle Sam.

Click Below to Book Your Free Consultation

During our session, we’ll:

Walk through a personalized example based on your retirement goals.
Show how this strategy fits seamlessly into your broader retirement plan.
Help you take the first steps toward maximizing income, reducing taxes, and securing a tax-free legacy.

Remember, the best time to convert to a Roth is usually - YESTERDAY!

Because the moment you convert, every dollar of compound interest you earn from that moment forward is completely income tax and RMD-FREE!

Don't wait—secure your financial future today. Book your free consultation now to see how this strategy can revolutionize your retirement plan!

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