Roth IRA Conversions: The Time May Be Right
Perhaps you've thought about converting part of your traditional IRAs to a Roth IRA in the past, but you didn't pull the trigger. For instance, you might not have had the money available to pay the tax on a conversion without diluting your retirement assets. Or you may not have wanted pay that tax in a year in which you were in a high tax bracket.
Now, however, with the possibility that Congress will soon pass significant tax cuts, the time may be right to convert to a Roth this year or next.
With a traditional IRA, contributions may be deductible from your taxable income, but not if you also participate in a retirement plan at work or earn too much to qualify for a deductible IRA. When you take distributions from a traditional IRA, usually during retirement, you're taxed at the rates for ordinary income on the portion representing tax-deductible contributions and earnings. Under current law, the top ordinary income tax rate is 39.6%. In addition, if you withdraw from an IRA before you reach age 59½, you must pay a 10% penalty tax unless you qualify for a special exception.
© 2020 Advisor Products Inc. All Rights Reserved.
- 5 Steps To Realize An Early Retirement Dream
- 7 Financial Steps Forward In A Second Marriage
- Weigh Five 401(k) Options When You Leave A Job
- Seven Key Components Of Trump's Tax Reform Plan
- Dynasty Trusts: The Gift That Just Keeps On Giving
- Five Tax-Smart Ways To Transfer Your Wealth
- 7 Top Tax Incentives That Entice Investors
- How To Improve Chances For College Financial Aid
- Ten Frequent Retirement Mistakes You Should Avoid
- Meeting With The Family For Elder Care Planning
- 20 Questions On Required Minimum Distributions
- Seven Good Reasons To Create And Fund A Trust
- 6 Common Medicare Myths That Should Be Dispelled
- How To Save For Your Retirement At Every Age
- Six Hurdles To Overcome In Stretch IRA Planning