The Roth conversion deadline is 12/31. Learn how you can save money on your taxes by executing this strategy prior to the deadline.

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If you’re looking to maximize your retirement savings, you may want to consider converting your traditional IRA to a Roth IRA. By doing so, you can potentially lower your tax bill in retirement and take advantage of tax-free growth.

But before you make the move, it’s crucial to understand Roth IRA conversion strategies that can help you make the most out of your retirement savings.

Here are some of the key strategies to keep in mind:

1. Spreading out the conversion. Rather than converting your entire traditional IRA balance to a Roth in one go, consider spreading it out over multiple years. This can help you avoid going into a higher tax bracket in any given year and also give you more control over your tax bill.

2. Timing the conversion. Depending on your income level, it may make sense to convert to a Roth IRA in a year when your income is lower. For example, if you’re taking a sabbatical or have experienced a reduction in income, it may be a good time to convert.

3. Maximizing deductions and credits. While Roth IRA conversions are taxed, there are a few deductions and credits you may be eligible for that can help reduce your tax bill. For example, you may be able to take advantage of the student loan interest deduction or the Child Tax Credit.

4. Coordinating with other income sources. If you have other sources of income, such as rental income or a side gig, it’s important to coordinate your Roth IRA conversion strategy with those income sources. This can help you avoid going into a higher tax bracket and keep more of your hard-earned money.

5. Taking advantage of the 5-year rule. Once you’ve converted to a Roth IRA, you’ll need to wait at least five years before you can start taking tax-free distributions. However, there are certain exceptions to this rule, such as if you’re using the money for a first-time home purchase or if you’re over the age of 59 and a half.

Before you decide on a Roth IRA conversion strategy, it’s essential to speak with a financial advisor who can help guide you through the process. Together, you can evaluate your current financial situation and determine the best approach for your unique needs and goals.

In conclusion, Roth IRA conversions can be an excellent way to maximize your retirement savings and lower your tax bill in retirement. By considering the strategies outlined above, you can make the most out of your conversion and ensure that you’re set up for a comfortable retirement.