How to Know If You Should Do a Roth Conversion

December 6, 2019 | Bobby Hapanowicz
Couple Receiving Financial Advice

Depending on the type of Individual Retirement Accounts (IRA) you have in your portfolio, you may need to look at the potential of a Roth IRA Conversion as part of your financial retirement plan. 

So, why should you consider a Roth IRA Conversion? Simply because a Roth IRA is a tax-free investment. It’s important to note though that any taxes deferred on your current traditional IRA will be due at the time of the conversion.

For this reason, many people postpone converting their IRAs until early in their retirement, usually when they are in a lower tax bracket. Other people choose to turn over their IRAs during their peak earning years, while they have extra income to pay the taxes and will not be burdened by them later in life. 

Here are a few considerations for how to handle Roth IRA conversions, at any stage of life. 

Roth IRA Conversions are Final 

Choosing to convert to a Roth IRA is a permanent decision. You cannot reverse the decision later to switch to a different type of retirement account.

Roth IRAs are Part of Overall Retirement Plan

Roth accounts should be only part of your plan. A key benefit to a Roth account is that it does not have a required minimum distribution at seventy and a half years of age as traditional IRA’s do. Considering which investments and assets you will withdraw from before and after you reach seventy and a half should be a focus of consideration of your overall retirement plan. 

Remember Your Roth IRA When Relocating

Some states do not charge income tax on retirement distributions. As part of your retirement plan, you may want to consider relocating to one of these states and making your retirement home or “snow-bird” residence your permanent address. 

Hire a Financial Advisor

To maximize your retirement plan and help guide you through the various tax laws, distribution plans, and financial security measures, you need to hire a financial advisor from a reputed wealth management firm. This ensures you have an experienced and trusted team that has your back today and in your future. 

At Hapanowicz & Associates are here to help you with your retirement planning, as well as complex considerations such as Roth IRA conversions and the timing of these decisions. If you have any questions or concerns regarding your retirement planning, if you are considering a Roth IRA conversion, or if you have any other questions or concerns, feel free to reach out to any member of the H&A team. You can also reach out to me directly at bobby@hapanowicz-associates.com

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


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