Megan shares strategies on how to convert an IRA to a Roth account and how to sustain income throughout retirement….(read more)

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Converting an Individual retirement account (IRA) into a Roth IRA can be a smart financial move, but it’s important to understand the process before making any decisions. A Roth IRA offers tax-free growth and withdrawals in retirement, making it an attractive option for many investors. However, there are some important considerations to keep in mind when converting an IRA to a Roth.

The first step in converting an IRA to a Roth IRA is to determine if you are eligible to make the conversion. In order to convert an IRA to a Roth, you must have a modified adjusted gross income (MAGI) of less than $140,000 for single filers or $208,000 for married couples filing jointly. If you exceed these income limits, you may still be able to make a conversion by using a backdoor Roth IRA strategy, but it’s best to consult with a financial advisor before proceeding.

Once you have confirmed your eligibility, the next step is to decide how much of your traditional IRA you want to convert to a Roth IRA. You can convert the entire balance of your IRA, or just a portion of it. Keep in mind that you will have to pay taxes on the amount you convert, as the funds in a traditional IRA are pre-tax dollars, while the funds in a Roth IRA are after-tax dollars.

When you convert an IRA to a Roth IRA, you will need to report the conversion on your tax return for the year in which it took place. This means that you may owe taxes on the amount you convert, so it’s important to plan for this expense accordingly.

One important consideration to keep in mind when converting an IRA to a Roth IRA is the potential impact on your retirement savings goals. While a Roth IRA offers tax-free growth and withdrawals in retirement, you will need to consider the short-term tax implications of making a conversion. It’s important to weigh the benefits of tax-free withdrawals in retirement against the immediate tax liability of converting your IRA to a Roth.

Overall, converting an IRA to a Roth IRA can be a savvy financial move for many investors, but it’s important to understand the process and consider the potential tax implications before making any decisions. Consulting with a financial advisor can help ensure that you are making the best choice for your individual financial situation.