Tax mitigation is often one of the top priorities for our clients when they meet with us. With ROTH options now available in more retirement plans, including SIMPLE IRAs starting this year, this topic has become a focal point of many conversations. But what if you haven’t been able to take advantage of ROTH options before, are retired now, or make too much to contribute to a ROTH IRA? Then a ROTH conversion might be the right answer for you.
A ROTH conversion is when you move funds from a traditional pre-tax account (such as a Traditional IRA or 401(k)) into a ROTH account. You’ll pay taxes on the converted funds now, but the money will grow tax-deferred, and future withdrawals will be tax-free.
Here are a few things to think about if you’re considering a ROTH conversion:
- Are you concerned about future tax rates?
- Do you have non-qualified funds or cash available to cover the taxes on the conversion?
- Have you created a Financial Plan that estimates your taxable income in retirement?
- What are your beneficiaries’ income tax brackets?
- Could a ROTH conversion potentially reduce your estate tax liability?
If you're unsure about any of these questions, schedule a consultation with us. We're here to help!