Congratulation to last week’s wine winner, Maria S., from Wilmington, NC!
We’re going to go over two ways to do a Roth conversion. A Roth conversion is one of the powerful tools you may have to reduce your taxes in the future and it’s important to understand how to do it. Now, just as a reminder, a regular IRA or 401k or 403B is where you put pre-tax income into an account, and it grows tax deferred until you withdrawal the money. . In a Roth IRA, you pay taxes on the money going into your account, and then all future withdrawals are tax-free, forevermore!
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Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Carolina Retirement Planners are not affiliated companies. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice to meet the particular needs of an individual’s situation. If properly structured, proceeds from life insurance are generally income tax free. Our firm does not provide, and no statement contained herein shall constitute tax or legal advice. All individuals are encouraged to seek the guidance of a qualified tax professional regarding their personal situation. It is important that you do not use email to request, authorize or effect the purchase or sale of any security, to send fund transfer instructions, or to affect any other transactions. Any such request, orders, or instructions that you send will not be accepted and will not be processed. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Recipients should be aware that all emails exchanged with the sender are automatically archived and may be accessed at any time by duly authorized persons and may be produced to other parties, including public authorities, in compliance with applicable laws. A Roth Conversion is a taxable event and may have several tax related consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. 730684…(read more)

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

A traditional IRA and a Roth IRA are two popular retirement savings accounts that offer different tax advantages. While a traditional IRA allows for tax-deductible contributions and tax-deferred growth, a Roth IRA offers tax-free withdrawals in retirement. Many individuals may want to convert their traditional IRA into a Roth IRA to take advantage of the tax benefits, but the process can be a bit complicated.

First, it’s important to understand the tax implications of converting a traditional IRA into a Roth IRA. When you convert a traditional IRA into a Roth IRA, you will owe income tax on the amount of the conversion. This is because contributions to a traditional IRA are made with pre-tax dollars, while contributions to a Roth IRA are made with after-tax dollars. So, when you convert a traditional IRA into a Roth IRA, the amount of the conversion will be added to your taxable income for the year.

So, how do you go about converting a traditional IRA into a Roth IRA? Here are the steps you need to follow:

1. Check your eligibility: Before you can convert a traditional IRA into a Roth IRA, you need to make sure that you are eligible to do so. In general, anyone can convert a traditional IRA into a Roth IRA, regardless of their income level. However, if you are married and file separate tax returns, you are not eligible to convert a traditional IRA into a Roth IRA if your modified adjusted gross income (MAGI) is $10,000 or more.

2. Consider the tax implications: As mentioned earlier, converting a traditional IRA into a Roth IRA will result in a tax bill. Before you proceed with the conversion, it’s important to consider whether the tax bill is worth it in the long run. If you expect to be in a higher tax bracket in retirement, converting to a Roth IRA may make sense. However, if you expect to be in a lower tax bracket in retirement, you may be better off sticking with a traditional IRA.

3. Decide how much to convert: You can convert all or part of your traditional IRA into a Roth IRA. It’s up to you to decide how much you want to convert, but keep in mind that you will owe income tax on the amount of the conversion. It may be wise to consult with a financial advisor to determine the optimal amount to convert based on your individual financial situation.

4. Complete the conversion: Once you’ve made the decision to convert your traditional IRA into a Roth IRA, you will need to contact your financial institution to initiate the conversion. This typically involves filling out a conversion form and specifying the amount you want to convert. Your financial institution can provide guidance on the specific steps you need to take to complete the conversion.

It’s important to note that the rules and regulations surrounding IRA conversions can be complex, and the tax implications can be significant. Therefore, it’s highly recommended to consult with a financial advisor or tax professional before proceeding with a traditional IRA to Roth IRA conversion. They can help you understand the potential tax consequences and decide if converting to a Roth IRA is the right move for your retirement savings strategy.