Check out this example 👇️⁠
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➡️ A 65-year-old client with $250K has a 7% average rate of return until the Required Minimum Distribution age ⁠
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⏰ By the time she hits RMD age, the account value will be ~$350K, so RMD in year one is $13,232 💵⁠
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In the 22% tax bracket, she has to pay $3K in taxes on the $13,232 👎️⁠
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If you add up accumulated taxes on RMDs, it adds up to $115K in total taxes paid from age 70 to 90 🤯⁠
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Did you know that Roth IRAs do not have RMDs? 🤔⁠
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#savings #taxes #retirementplanning #financialadvisor
⁠…(read more)

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Retirement is a time when most people look forward to their golden years of relaxation and financial independence. But, the reality is that retirement can be a tricky financial time, with many people not knowing how to handle the taxes and regulations that come with it. One of the most important aspects of retirement planning is understanding how to manage your Required Minimum Distributions (RMDs). RMDs are the amount of money that must be withdrawn from retirement accounts each year, and if not done correctly, can lead to additional taxes.

Fortunately, there are ways to minimize the taxes associated with RMDs, and one of them is to consider a strategic Roth IRA conversion. A Roth IRA conversion is when you convert a portion of your traditional IRA to a Roth IRA, which can help you avoid extra taxes on RMDs.

The reason why a Roth IRA conversion can be beneficial is because the money in a Roth IRA is not subject to RMDs. This means that you can keep the money in the Roth IRA for as long as you want, without having to worry about additional taxes. Additionally, the money in a Roth IRA grows tax-free, so you can benefit from tax-free growth in retirement.

Another advantage of a Roth IRA conversion is that it can provide you with more flexibility when it comes to managing your retirement income. For example, if you find yourself in a situation where you need more money than your RMDs provide, you can always withdraw from your Roth IRA without having to worry about additional taxes. This can be especially helpful if you are in a situation where you need to access your funds quickly.

Finally, a Roth IRA conversion can also help you preserve your assets for future generations. Since the money in a Roth IRA is not subject to RMDs, it can be passed on to your heirs without having to worry about additional taxes. This can be a great way to ensure that your loved ones are taken care of after you’re gone.

Overall, a strategic Roth IRA conversion can be a great way to avoid extra taxes on RMDs and ensure that you have the flexibility and financial resources you need in retirement. If you’re looking for ways to maximize your retirement savings and reduce your tax burden, a Roth IRA conversion may be the right choice for you.