What are the benefits of looking at a Roth IRA conversion?

We will cover why after market loss in 2020 why now might be a good time to take advantage of converting money.

What will the added government debt potentially affect with your future tax rates?

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Securities offered only by duly registered individuals through Madison Avenue Securities, LLC (MAS), member FINRA/SIPC. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM), a Registered Investment Adviser. MAS and The LifeWealth Group are not affiliated entities. AEWM and The LifeWealth Group are not affiliated entities. Our firm is not affiliated with or endorsed by any governmental agency. 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. Guarantees and protections provided by insurance products, including annuities, are backed by the financial strength and claims-paying ability of the issuing insurance carrier. A Roth Conversion is a taxable event and may have several tax related consequences. Neither the firm nor its agents or representatives may give tax advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 629315…(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

When it comes to saving for retirement, there are multiple options available, such as 401(k), IRA, and Roth IRA. Among these saving plans, traditional IRA and Roth IRA are two popular choices for many savers. While both these saving plans offer tax-advantages, they have different rules and regulations on taxation and contribution limits. In this article, we will compare the Roth Conversion vs Traditional IRA and help you decide which option is best for you.

Traditional IRA

A traditional IRA is a pre-tax account, which means contributions made to this account are tax-deductible in the year in which they are made. This tax deduction can lower your current taxable income, thereby decreasing the amount you owe to taxes. The money in a traditional IRA account grows tax-deferred until you withdraw it. However, when you withdraw the money in retirement, it is subject to income tax.

One thing to keep in mind with traditional IRA is that you are required to take a minimum distribution after you turn 72. This is known as a required minimum distribution (RMD). RMD is calculated based on the balance in the traditional IRA account and your life expectancy.

Roth IRA

A Roth IRA is a post-tax account, which means the contribution made to the account is taxed in the year of contributions but any earnings and growth on the money in the account is tax-free when you withdraw it in retirement. Additionally, Roth IRA doesn’t require any minimum distributions during your lifetime. That means, you can withdraw money from the account at any time or let it sit in the account for as long as you want without being forced to withdraw any amount until your heirs inherit it.

Roth Conversion

A Roth conversion is a process of transferring funds from a traditional IRA, 401(k), or any other eligible retirement account to a Roth IRA. When you perform a Roth conversion, you must pay taxes on the amount transferred that year. However, after the conversion, the account will grow tax-free, and qualified withdrawals in retirement are also tax-free.

One of the biggest benefits of a Roth conversion is that it can reduce your taxable income in retirement. This is because the money in a Roth IRA is tax-free when you withdraw it, so it won’t be counted as income. Additionally, if you expect your future tax rate to be higher than your current tax rate or anticipate that tax rates will go up in the future, performing Roth conversion could be beneficial.

Roth Conversion vs Traditional IRA – Which one is right for you?

The decision between Roth Conversion vs Traditional IRA depends on your current tax situation and financial goals. For people who are looking to lower their taxable income and reduce their income tax liability now, a traditional IRA could be the right option. However, if you expect your future tax rate to be higher, or you want to avoid being forced to take RMDs, Roth IRA could be a better option.

If you have a traditional IRA, you can consider performing a Roth conversion to take advantage of the tax-free growth and eliminate the RMDs requirements. However, keep in mind that it is essential to pay taxes on the amount transferred during the year of conversion.

In conclusion, both Roth IRA and traditional IRA have their advantages and disadvantages, and there isn’t a one-size-fits-all approach. It’s important to evaluate your needs and financial goals and work with a financial advisor to decide which option is best for you.