Long-Range Retirement Planning: Multi-Year Conversion Ladders and Estate Strategy

With 3-5 years before retirement, you can build multi-year Roth conversion ladders, analyze pension and Social Security options carefully, and refine contribution strategies. This is the ideal time to engage a retirement-focused CPA for ongoing planning.

What you can do with this lead time:

• Multi-year Roth conversion ladders. Spread conversions across several years, converting just enough each year to fill your current bracket. By retirement, you've shifted significant tax-deferred money into Roth without a large tax hit in any single year.
• Social Security optimization modeling. Model different claiming ages against projected income and spousal benefits. Delaying from full retirement age to 70 increases your benefit by about 8% per year -- but only if your other income and life expectancy support the delay.
• Pension analysis. The lump sum versus annuity decision depends on interest rates, life expectancy, and how lump-sum money would be invested if rolled to an IRA. Starting the analysis early lets you track these factors as they change.
• Contribution strategy. Should you maximize traditional 401(k) contributions to reduce taxable income now, or shift to Roth 401(k) to build tax-free assets? The answer depends on your current bracket versus your expected retirement bracket.

The tradeoff: Plans this far out depend on assumptions about tax rates and legislation that may change. The plan should be revisited annually -- a CPA who does ongoing retirement planning treats it as a living document.