Vincent Virga Discusses Roth Conversions on Steroids: How Retirees Can Combine Roth Strategies and Rule 7702 Planning in 2026 to Manage Long-Term Tax Exposure
2026 is an important year for retirees to review their long-term tax strategy. It focuses on how Roth conversions can help reduce future taxable income and how some retirees also review properly structured life insurance under Rule 7702 for added tax flexibility. It clarifies that both tools serve different purposes. It encourages retirees to speak with qualified professionals to decide if these strategies fit their needs.
Rising uncertainty about future income tax rates, the scheduled changes set to take effect in 2026, and reductions in the federal estate-tax exclusion have created an urgency for retirees and near-retirees to reexamine how they manage tax exposure across the remainder of their lifetimes. A coordinated plan that blends intentional Roth conversions with well-designed IRC §7702-qualified life insurance solutions can help create tax-diversified, flexible retirement balance sheets and reduce the risk of large taxable distributions for heirs. https://www.investopedia.com/major-2026-tax-bracket-changes-and-what-they-mean-for-retirement-planning-11860631?utm_source=chatgpt.com
“Roth conversions remove future tax uncertainty by paying tax now and creating tax-free buckets later, while 7702-qualified cash-value life insurance offers another tax-favored vehicle for cash accumulation and tax-efficient transfers,” Vicent explained.
Why 2026 matters
Several widely-reported developments make 2026 a critical planning year: federal income tax brackets and many individual provisions are changing after earlier expirations, and the lifetime federal estate-tax exclusion is scheduled to decline compared with recent years — both drivers of potentially higher tax burdens for retirees and beneficiaries. That combination increases the value of pre-emptive, tax-aware moves such as Roth conversions and tax-efficient life insurance design.
What “Roth Conversions on Steroids” means
This integrated approach uses three coordinated tools:
- Strategic, staged Roth conversions — converting Traditional IRA/401(k) assets to Roth IRAs in targeted low-income years to lock in current tax rates, avoid future required minimum distribution (RMD) tax spikes, and reduce taxable income that could otherwise compound into larger tax events for heirs.
- IRC §7702-compliant cash-value life insurance (7702 planning) — properly structured permanent life insurance that satisfies the tax-code tests under §7702 so cash value growth and policy loans can deliver tax-advantaged liquidity, and death benefits pass tax-efficiently to beneficiaries. These policies can serve as a complement to Roth buckets by providing tax-sheltered accumulation and legacy planning flexibility.
- Holistic coordination with Medicare, IRMAA, and estate rules — because Roth conversions increase taxable income in the conversion year, planners need to model impacts on Medicare Part B/D surcharges (IRMAA), Social Security taxation, and estate tax exposure. Combining modest, multi-year Roth conversions with 7702 policy design can smooth taxable income and preserve net benefits. https://www.kiplinger.com/retirement/roth-iras/how-to-plan-this-years-roth-conversion?utm_source=chatgpt.com
Typical outcomes and who benefits
- High-net-worth retirees concerned about future estate taxes and heirs’ tax bills: can reduce future taxable distributions and create a mix of tax-free and tax-favored assets.
- Retirees expecting higher future tax rates: benefit from converting assets while current rates remain comparatively lower. https://www.barrons.com/articles/roth-traditional-ira-conversion-retirement-planning-9162ec06?utm_source=chatgpt.com
- Those seeking tax-flexible liquidity (to pay long-term care, bridge cash shortfalls, or fund legacy gifts): may find 7702-qualified policies provide useful, tax-efficient access to cash via loans or withdrawals when structured correctly. https://www.insurancegeek.com/retirement/7702-plans/?utm_source=chatgpt.com
Realistic next steps for retirees
- Gather current account balances, recent tax returns, projected retirement income, and existing life-insurance illustrations.
- Ask an accredited financial planner and tax advisor to run Roth conversion scenarios for the next 3–7 years.
- If considering 7702 planning, obtain multiple in-force illustrations and independent actuarial reviews to compare net-of-cost accumulation and access options.
- Revisit estate documents and beneficiary designations so they reflect any new Roth or life-insurance allocations.
Vincent shared: “My team is excited to help retirees understand how changing tax rules may affect their long-term income. Roth conversion strategies give you a way to review your tax exposure with clarity and purpose.”
About Vincent Virga
Vincent Virga is a financial adviser, author, and CEO of PFS Wealth Management Group. He began his career on Wall Street in 1990 and moved to Main Street to help pre-retirees and retirees build clear and structured tax-efficient financial and retirement plans. He has been married for 33 years to his high school sweetheart. He has recently completed an IRONMAN and the NYC Marathon, achievements that reflect his discipline and drive. He brings that same commitment to the families he and his team serve each day.
Learn more: www.pfswealthgroup.com
