Roth IRA Conversion / 401K Rollover Mistakes

The impact of the pandemic along with low tax rates makes now an opportune time to convert a traditional IRA accounts to a Roth IRA, however, this Roth IRA conversion may not be the right financial move for everyone.

A Roth IRA Conversion makes sense when taxes are low, your income is reduced, you have the cash to pay the taxes that become due and if you don’t want to leave your beneficiaries a big tax bill. Request the 6 Reasons Why now Might be a Great time to Convert your Traditional IRA to a Roth IRA brochure.

With a traditional IRA, you don’t pay taxes on the money you contribute; however, withdrawals are taxed as ordinary income. With a Roth IRA, you contribute monies which you have already paid taxes on, so the money you withdraw in retirement is not taxable. A Roth conversion means you pay tax on your accounts in the year you move your money from the traditional IRA account to the Roth IRA in order to set up tax-free income stream later in life while in retirement.

It is wise to consider converting to a Roth IRA in a year when you find yourself in an unusually low tax rate.

Some experts say that due to current historical low tax rates now is a great time to convert your traditional IRA to a Roth account. The best time in recent history to convert to a Roth IRA is between now and 2025, the last year of tax reform, taxes are on sale.

You can also convert part of your retirement savings and maintain both pre- and post-tax retirement accounts. A Roth conversion is arguably a powerful tax diversification tool for financial planning.

The tax advantages and portability of the 401(k) have provided many Americans with the opportunity to build a nest egg throughout their working lives and it is often, it’s one of their largest retirement assets. If you contribute to a 401(k), its flexibility gives you choices as you go through life. Make sure you know the rules, because “401(k) Rollover Mistakes can be Costly!”
With different rollover options, it can be difficult to know which suits your specific situation. Call my office for assistance.