Financial Fact vs Fiction: This Roth Conversion Myth Could Cost You
ARTICLE SUMMARY - Here's a summary of the article in 4 key points:
The traditional view that paying off a mortgage saves you the interest rate equivalent isn't entirely accurate - due to amortization schedules, paying off a mortgage with 10 years remaining on a 30-year term may only save 2-3% annually rather than the full 5% interest rate.
Roth IRA conversions aren't automatically tax-advantageous - unless you have cash to pay the conversion tax bill, you'll likely only keep 50-70 cents on the dollar and need significant time for compound growth to offset this loss.
Social Security isn't facing complete collapse - even if the trust fund is depleted by 2033, the system would still pay about 80% of benefits through ongoing payroll tax revenue.
The "4% rule" for retirement withdrawals is outdated - it doesn't account for today's longer retirement periods (potentially 40-45 years), anticipated lower market returns, or the reality of variable spending patterns in retirement.