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The Roth Conversion Strategy the Wealthy Use for Tax-Free Growth and How AI Is Changing the Game

Could your 401(k) or IRA actually be costing you more in taxes than it’s saving you?

Most people are taught that maxing out retirement accounts is the “smart” thing to do. Put money in your 401(k), defer taxes, and someday you’ll retire in a lower tax bracket and live happily ever after.

But here’s the problem:

For many high earners, entrepreneurs, and serious investors, that story is simply not true.

In fact, for a lot of people I talk to, traditional retirement accounts become a tax time bomb. The money grows, sure, but so does the future tax bill. And if tax rates go up over your lifetime, or you end up with more income later (which is the goal), you could actually pay more in taxes by deferring them.

That is why the wealthy quietly use strategies like Roth conversions, cash value life insurance, and now even AI-driven tax planning to create tax-free or tax-efficient income streams.

Recently, I brought on Kenner French, founder of Vast Solutions Group and author of Modern Millions: AI – How to Make Millions, Save Millions, Protect Millions. He has been using artificial intelligence in tax planning since 2010, long before most people could even spell “ChatGPT.” Even Kevin O’Leary from Shark Tank called out how innovative his use of AI is for helping entrepreneurs save on taxes.

Let me break down what we talked about and how this applies to you.

What Is a Roth Conversion, Really?

First, let’s get clear on the basics.

A Roth IRA is an account where:

• You pay taxes on the money now

• The money grows tax-free

• And if you follow the rules, you can withdraw it tax-free in retirement

A Roth conversion is simply this:

You take money that is in a pre-tax account (like a traditional IRA or old 401(k)), you move it into a Roth IRA, and you pay the tax now instead of later.

For example:

• You have $100,000 in a traditional IRA

• You convert $20,000 of it to a Roth

• That $20,000 shows up as income this year and you pay tax on it

• From that point forward, that $20,000 and all its growth can be tax-free

So why would anyone choose to pay taxes sooner?

Because the wealthy understand something most people never stop to consider:

It is not about avoiding taxes. It is about paying taxes once, at the lowest rate, and never again on the same dollar.

When a Roth Conversion Makes Sense

A Roth conversion is not for everyone and not for every year. Timing matters.

Here are some situations where it may make a lot of sense:

1. You Have a “Low Income” Year

This might be because:

• You were laid off

• Your business had a down year

• You shifted careers

• You sold a business in a previous year and now your income dropped

In those years, your tax bracket may be significantly lower. That can be a perfect time to shift money from traditional to Roth and lock in tax-free growth at a discount.

2. You Are Early in Your Wealth Journey

Younger investors or those in lower tax brackets can sometimes benefit from funding Roth accounts early, especially if they have high future income potential. Pay the tax now while rates are low, then let your money grow for decades tax-free.

3. You Believe Tax Rates Are Going Up

I am not here to sell fear, but I am also not naive. With the amount of government spending and debt we have, higher future tax rates are a very real possibility.

If you believe taxes are likely to increase over time, Roth conversions can be a way of saying:

“I’d rather pay tax at today’s known rate than gamble on tomorrow’s unknown rate.”

The Catch: Roth Conversions Are Not Free

When you convert, you are adding income to your current year. That can:

• Push you into a higher tax bracket

• Affect certain deductions and credits

• Impact Medicare premiums at higher income levels

That is why this strategy should never be done blindly. You want to model the impact, not guess.

And this is where AI and great tax planning come together.

How AI Is Changing Tax Strategy

Kenner shared something interesting on the show. His firm built an AI model they call Einstein. It ingests tax returns and models different scenarios to find ways to reduce lifetime tax liability.

Does AI replace the tax professional? Not at all.

In fact, current AI models still have an error rate (what Kenner called a sigma rate). So they use AI to churn through the complexity and then have human CPAs and tax attorneys review the results.

It is the combination that is powerful:

• AI can process volume, patterns, and what-if scenarios at a speed no human can match

• Humans bring judgment, context, and experience

Now imagine running scenarios like:

• “What if I convert $30,000 this year and $20,000 next year?”

• “What if my income drops for two years?”

• “What if tax brackets change in 2026 when current tax laws sunset?”

Instead of guessing, you can model it and see the impact over decades.

That is the future of tax planning, and frankly, the wealthy are already moving in that direction.

Where Life Insurance Fits into the Picture

If you have followed me for any length of time, you know I use and teach properly structured cash value life insurance as a powerful tool for:

• Tax-favored growth

• Lawsuit and creditor protection (in many states)

• Liquidity and access to capital

• A place to store cash between deals

In many ways, it functions like a tax-free savings environment, similar to a Roth in that:

• You are not taxed on the growth each year

• You can access the money tax-free if structured and used correctly

Where it really shines compared to Roths:

• No income limitations

• No contribution limits in the same sense (you are only limited by insurability and design)

• You can use the cash value to invest in real estate, your business, private lending, and other opportunities

With a Roth IRA, you cannot just take that money and invest directly in your own business or personally controlled deals (at least not without running into prohibited transaction issues).

With cash value life insurance, you can:

• Store cash safely

• Keep it growing

• Access it via policy loans

• Use it in your business or investmentsAll while preserving tax advantages and protection features.

I do not see Roth vs. life insurance as either/or. For many of my clients, it is both/and, used strategically.

Why This Matters If You Want to Be Work Optional

A lot of people are chasing higher returns while ignoring their tax drag.

You might be:

• Crushing it in your business

• Doing well in real estate

• Building up investments

But if the IRS is quietly taking an oversized cut every year or at retirement, it can delay or even derail your path to being work optional.

The wealthy think in terms of:

• Cashflow

• After-tax return

• Control and flexibility

• Protection

Roth conversions, AI-driven tax strategy, and properly structured life insurance are all tools that help improve after-tax cashflow and reduce risk, not just chase a number on a statement.

What You Can Do Next

I am not giving you personalized tax advice here. Your situation is unique. But here are some smart next steps:

• Review your current tax picture. Look at your last couple of years of tax returns. Are you consistently in a high bracket? Did you have a “down” year that you missed using for conversions?

• Stop treating your 401(k) and IRA as sacred.They are just tools. Ask better questions:

• Does this help or hurt my long-term tax situation?

• Would some of this money be better in a Roth or in a tax-favored life insurance strategy?

• Use professionals who think beyond filing forms.You want people in your corner who understand Roth conversions, AI modeling, tax-efficient investing, and asset protection, not just box-checking.

• Build a plan around cashflow, not just accumulation.Remember, the goal is to become work optional, not just to stack up a big account balance you can never use without giant tax hits.

If this struck a chord with you, this is the kind of planning we help people with all the time. You do not have to keep doing what Wall Street has told you to do for the last 40 years.

There are smarter, more efficient ways to grow and protect your wealth.

Your money should be working harder for you, not for the IRS.