Overview
High‑net‑worth retirees often assume that “filling the 22% bracket” is a safe, conservative Roth strategy or that doing nothing is fine as long as their portfolio is large. But the data tells a very different story. In this example, these strategies would leave millions on table.
Using the Roth IRA Conversion Optimizer, we modeled a couple entering retirement with:
- $7,000,000 in a Traditional IRA
- $2,500,000 in taxable savings
- No Roth balance
- Age 65, Married Filing Jointly
- $120,000 annual expenses
- Social Security beginning at age 70
- 9% return assumption
- 3.0% inflation, 2.5% bracket inflation
- 25 year projection (age 90)
The results were striking:
Optimized Roth conversions produced roughly $6 million more lifetime wealth than doing nothing, and about $4 million more than filling the 22% bracket.
Three Strategies Compared
1. Baseline: No Roth Conversions
Outcome: Lowest lifetime wealth
With no conversions, the couple’s $7M IRA continues compounding tax‑deferred. RMDs eventually explode, pushing them into higher brackets, triggering IRMAA surcharges, and creating a steep tax drag late in retirement.
2. Fill the 22% Bracket
Outcome: Moderate improvement ($2M saved relative to baseline)
This strategy is better than doing nothing, but the Optimizer’s charts show it is still far from ideal. The 22% bracket fill:
- Reduces future RMD pressure
- Smooths taxes modestly
- Reduces NIIT
- But leaves millions of dollars of potential tax‑free Roth growth unrealized
Not terrible, but nowhere near optimal.
3. Full Roth Optimization
Outcome: Best result ($6M saved relative to baseline and $4M saved relative to filling the 22% bracket)
The Optimizer identifies the mathematically optimal taxable‑income target—in this case $610,000—and converts precisely enough each year to hit that target.
This strategy:
- Front‑loads conversions into lower‑tax years
- Smooths taxes across decades
- Minimizes lifetime RMDs and Taxes
- Minimizes NIIT
- Maximizes tax‑free Roth growth
- Produces the highest final after‑tax net worth
Setting up the Case Study
1. Create the Scenario
To set up the Scenario, you type the client details directly into the spreadsheet in the Scenario 1 column as shown below. Enter an Income Target of $0 for Scenario 1. This Income Target triggers the “Baseline mode” which prevents Roth conversions.
2. Load the Scenario
Next you click the “Load Scenario” button on the Control Panel which will create a detailed projection as shown below.
3. Run the Roth Optimizer
Next click the “Run Roth Optimization” button. This will create the chart shown below. On this chart, you can easily see how the optimal conversion changes based on the rate of the return (columns) as well as how it compares to filling the various federal tax brackets (rows with black borders).
Find the max value in the column that matches the rate of return for your initial scenario. In this case, the optimal Income Target for the 9% columns is $610k.
4. Add the Optimal Income Target and Bracket Fillers
Take the Income Target from the previous step and enter it into Scenaro 5. Keep all the other Scenario values the same. For Scenarios 2 – 4, enter an Income Target of 3, 4 and 5 which are the special modes for filling the 22%, 24% and 32% brackets. Note: for this article only the baseline mode and “Fill the 22% mode” are discussed.
5. Graphically Compare the Scenarios
Next click the “Refresh Charts” button on the Control Panel. This will generate the image below comparing the five different scenarios in detail.
This chart clearly shows the difference between the scenarios in key metrics such as Roth IRA, T-IRA , taxes, savings, and lifetime wealth (after-tax net worth).
Why Optimization Wins
The Optimizer’s methodology, documented in the Compliance Disclosure Document and Tax Smoothing White Paper, explains why bracket‑fill strategies underperform:
- Future tax rates are endogenous, not guessed. Converting more today lowers future RMDs and future tax brackets.
- IRMAA cliffs, NIIT thresholds, and Social Security tax traps create non-linear tax spikes that optimization automatically solves.
- Multi‑year tax smoothing beats single‑year bracket filling.
- Roth growth is tax‑free forever, so maximizing Roth early compounds dramatically.
- RMD suppression alone can save millions for HNW households.
The Optimizer’s exhaustive search finds the mathematically best path—something bracket‑fill rules simply cannot do.
Conclusion
For high‑net‑worth retirees, Roth conversions are not about “filling a bracket.” They are about maximizing lifetime wealth.
In this case study, the difference was roughly:
- +$6M vs. doing nothing
- +$4M vs. filling the 22% bracket
That is the power of multi‑year Roth optimization.