Roth Ira

Should You Consider a Roth Conversion?

It seems like every week, we meet with a retiree who paid too much in taxes in the previous tax year. Why did this happen? Because they could have reduced their tax bill by converting their traditional IRA to a Roth IRA – but didn’t know it was a possibility.

A Roth conversion happens when you take a traditional IRA and “convert” it to a Roth IRA. Since money in a traditional IRA hasn’t been taxed yet and money in Roth IRAs have already been taxed, you’ll pay taxes on the converted amount in the year in which the conversion happens.

However, once the funds are converted to a Roth IRA, they’ll grow tax-free. If you take distributions from the Roth IRA after age 59 ½, those distributions will not be taxed – not only for your lifetime, but also for the lifetime of your beneficiary if they inherit the account.

This reduces your total taxes in retirement, especially if you’re taking part of your income from Social Security, part of your income from taxable retirement accounts like 401(k)s or pensions and IRAs, and part of your income from non-taxable accounts like Roth IRAs.

Discover the better side of retirement planning.

Could a Roth IRA conversion lower your tax bill in retirement? At Carlson Financial, we assist retirees and pre-retirees with maximizing retirement income by potentially minimizing how much you pay in taxes. Call us today at 844-CARLSON or CLICK HERE to schedule your complimentary review.