$400,000. Same money. Wrong strategy.
This Roth conversion strategy for business owners is not really about how much you save. It is about where that money ends up by the time you need it.
Last week on my webinar, I shared my personal financial north star with attendees: by age 70, I want the wealth I have built from my business career sitting in Roth accounts instead of staying trapped in tax-deferred buckets forever.
Not every dollar I earn. I have bills too. 😄
I mean the wealth I am building for the future.
Here is why that matters — and what the numbers can actually look like.
Imagine two business owners. Same hustle. Same discipline. Same $2 million saved by age 70.
On paper, they look identical.
But they can end up in very different places — all because of tax strategy.
At 73, the IRS generally starts forcing money out of tax-deferred retirement accounts through Required Minimum Distributions.
If her account balance is still $2 million, her first-year required distribution is roughly $75,000.
At a 24% federal bracket, that is about $18,000 gone in federal tax in year one alone.
And it does not stop there.
Those withdrawals usually keep rising over time. Depending on growth, lifespan, and future tax brackets, the lifetime tax hit can add up to hundreds of thousands of dollars.
Then, when she dies, her kids inherit what is left — but under current rules, most non-spouse beneficiaries still have to empty the inherited account within 10 years, and distributions from a traditional IRA are generally taxable to them.
Now take the same $2 million, but sitting in a Roth.
No forced withdrawals while she is alive.
She decides when to take money out.
She controls the timing.
And qualified withdrawals come out tax-free.
When that money goes to her kids, the rules are still better. Most non-spouse beneficiaries still have a 10-year window to empty the inherited Roth, but distributions are generally tax-free if the Roth satisfied the 5-year rule.
The result is very different.
The family keeps more of the wealth.
Owner B did not earn more.
She just knew the end goal early enough to build toward it.
That can mean contributing pre-tax during high-income years when the deduction is valuable, then converting strategically in lower-income years, during a dip in business income, or when asset values are temporarily down.
That is the difference between compliance and strategy.
If Roth planning is already on your radar, these two guides are a good next step: Backdoor Roth IRA for Business Owners: High-Income Guide and Mega Backdoor Roth IRA: Contribute $70K+ Tax-Free.
Three weeks before April 15, this is exactly the conversation worth having.
Is your current setup moving you toward Owner A’s outcome or Owner B’s?
Because in the end, it is all about the outcome.
And if you are only thinking about contributions, deductions, and this year’s return, you may miss the much bigger question:
Where is this money going to live by the time you actually need it?
For the IRS rules behind the moving pieces here, review the official guidance on required minimum distributions and beneficiary rules for inherited IRAs.
Schedule a Free Tax Strategy Session
If you want a plan for Roth conversions, retirement account timing, and long-term tax control, book your strategy session here.