This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing whether now may be the time to consider a Roth conversion:
The combination of lower tax rates and lower asset values could make this a good time to convert assets from a traditional IRA to a Roth IRA. Converted assets are subject to federal income tax in the year of conversion, which might be a substantial tax bill.
But if all conditions are met, the Roth account will incur no further income tax liability for the rest of your lifetime or the lifetimes of your designated beneficiaries, no matter how much growth the account experiences.
The logic behind deferring taxes on retirement savings is that you may be in a lower tax bracket when you retire, so a current tax deduction might be more appealing than tax-free income in retirement. However, lower rates set by the Tax Cuts and Jobs Act may have changed that calculation for you. A cost-benefit analysis could help determine whether it would be beneficial to pay taxes on some of your IRA assets now rather than in retirement.
One strategy is to “fill your tax bracket,” meaning you would convert an asset value that would keep you in the same tax bracket. This requires…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 22 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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