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What should you do with those retirement savings? Whether you are leaving a job or navigating big expenses in retirement, David is here to answer a few questions from the mailbag.
 
Key topics on this episode: 
1:32 – Mailbag: Should I spend money on home updates in retirement?
8:24 – Mailbag: Should I convert my IRA rollover into a Roth?
 
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Mailbag: Should I Convert My IRA Rollover Into a Roth?

Many members of the American workforce have questions about their retirement accounts. Recently, one of our readers asked about converting an IRA Rollover into a Roth account. This is a question that has been weighing on many people’s minds, so we thought it would be a good idea to address it in this article.

First, it’s essential to understand the difference between an IRA Rollover and a Roth IRA. An IRA Rollover is a retirement account that holds money from an employer-sponsored retirement plan, such as a 401(k). In contrast, a Roth IRA allows individuals to contribute after-tax dollars to the account, which can then grow tax-free.

Converting an IRA Rollover into a Roth IRA can be a smart financial move for some individuals, but not for others. Here are a few factors to consider before making the switch:

1. Taxes: When you convert an IRA Rollover into a Roth, you’ll owe taxes on the amount you convert. The amount of taxes you’ll owe will depend on your current tax bracket and the size of the conversion. Before making the switch, you’ll want to calculate how much you’ll owe in taxes and whether it’s worth it.

2. Time Horizon: Converting to a Roth IRA makes the most financial sense if you have a long-time horizon before retiring. Since the account grows tax-free, you’ll have more time for your investment to compound and grow.

3. Income: If your income is high now, but you expect it to be lower in retirement, converting to a Roth IRA could be beneficial. When you withdraw money from a Roth IRA in retirement, you won’t owe any taxes on the money you withdrew.

4. Estate Planning: If you don’t plan to use all the money in your retirement account during your lifetime, converting to a Roth IRA could be a smart estate planning strategy. When you pass away, the Roth IRA will be passed on to your heirs tax-free.

In summary, converting an IRA Rollover into a Roth IRA can be a smart move for some, but not for all. Before making the switch, you’ll want to carefully consider your current tax bracket, your time horizon, your income, and your estate planning goals.

Remember, it’s always a good idea to seek advice from a financial professional before making any significant financial decisions. They can help you navigate the complex world of retirement planning and ensure that you’re making the best decisions for your unique situation.