Our Services
The Founders
Speaking Engagements
News & Information
Financial Briefs
Articles Of Interest
Featured News
Market Data Bank
Stock Quotes
Problem Solvers
Client Forms
Helpful Websites
Contact Us
Directions
Home
More Articles  Printer Friendly Version

 

Convert To A Roth IRA Now To Avoid Higher Taxes Later?

Should you convert your traditional IRA to a Roth IRA? A key factor in this decision is taxes. If you expect to be in a higher tax bracket during retirement than you are now, a conversion may make perfect sense. But if you anticipate being in a lower tax bracket then, you could decide to sit tight.

With a traditional IRA, contributions may be wholly or partially deductible, but distributions generally are taxed at ordinary income rates. You never can deduct Roth contributions, but payouts from a Roth after five years are tax-free if you've reached age 59½ by then. The trick is to figure out whether the promise of future tax-free distributions is worth the current tax price on a conversion. The amount you convert will be treated as a distribution and taxed at your rate for ordinary income.

As you weigh your options, don't overlook the favorable tax rates for joint filers. For instance, a taxable income of $200,000 puts you in the 33% bracket as a single filer, but if you're married, that same income level puts you in only the 28% bracket as a joint filer. Remember, though, that if one spouse is significantly older than the other or in ill health, a surviving spouse may end up paying higher tax in retirement as a single filer. Similarly, an inheritance could push you into a higher bracket at that point.

Consider the tax variables carefully. They could create an incentive to convert to a Roth before your golden years.


Email this article to a friend


Index
This Is Not Your Parents' Interest Rate Cycle
Life Is Fragile, So, Please, Value Each Day As Priceless
If Family Is Wealth, Then Planning Is Immortality
Everything You've Learned About Interest Rates May Be Wrong
This First Year Under The New Law Requires Planning
Commodities Stink But Serve A Purpose
10 Years After The Great Recession
The Interest Rate Inflection Point And Your Portfolio
Inflation: A Portfolio Risk That Never Dies
New Ways To Influence The Next Generation
Giving More To Loved Ones - Tax-Free
New Deduction Rules For Business Owners
A Bright Outlook For Consumer Spending
Six Tips To Avoid Phishing Scams
Good Riddance To The Alternative Minimum Tax
The New Tax Law Gives Roth Converters A Little Less Wiggle Room

This article was written by a professional financial journalist for The Dover Group and is not intended as legal or investment advice.

©2018 Advisor Products Inc. All Rights Reserved.
Financial planning provided by Williams Advisory Services, LLC, a Registered Investment Adviser.
This message is intended for the use of the person(s) to whom it is addressed.
It may contain information that is privileged, confidential, proprietary, and/or exempt from disclosure under applicable law