Should I Convert My IRA To A Roth IRA? #shorts #retirement #retirementplanning

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Should I Convert My IRA to A Roth IRA (Part 1) Who Should Convert IRA to Roth IRA

In this 3 part video blog I want to begin by discussing: Who should convert their IRA to a Roth IRA. I am asked quite often, “Should I Convert my IRA to a Roth IRA,” and to be honest the answer is, “It depends.” Everyone’s retirement and financial picture is different. Whether you should convert your IRA to a Roth IRA is not the same as your neighbor. So, let’s dive into 3 individuals that I believe should convert their IRA or a Roth IRA and I hope this helps you on your retirement journey!

1. Low Income tax Bracket

If you are in a low income tax bracket, you are a prime candidate for converting your IRA to a Roth IRA. Why do I say that. Well, when you convert IRA Retirement savings to Roth IRA tax free retirement savings, you have to pay tax on the conversion in the year you complete the Roth IRA conversion. For example, if you convert $5,000 from IRA to Roth IRA and you are in the 10% tax bracket, you are going to owe the IRS about $500 on that Roth IRA conversion. That is an extremely low amount of tax dollars when you consider where taxes might be in the future. Also, if you are in a low tax bracket, you might be able to complete your Roth IRA conversion and because of your filing status and deductions, not pay any taxes on your conversion (Talk to your CPA, accountant or me before completing your Roth IRA conversion).

2. You are Younger

If you are younger, let’s say 20’s to early 40’s, you have a lot more working and retirement investing years ahead of you. One of the benefits of long term retirement investing is compound interest. Compound Interest when doing Roth IRA conversion can be your catalyst to a tax free retirement income plan and tax free retirement investing strategy. Let me give you another example using the same $5,000 Roth IRA conversion above. If you are 30 and convert $5,000 from IRA to Roth IRA and you continue contributing $6,000 a year into your Roth IRA earning 6% a year, at the end of 35 years (age 65) you would have $707,000 in retirement savings. That is not including any other retirement investments or retirement savings. That is incredible!!

3. You have large tax deductions

This point really goes in tandem with the other 2 points, but it could also apply if you are retired. Today (2022) the standard tax deduction for married filing jointly is $25,900 and for single filers its $12,950. This has created an enormous opportunity for individuals and families to create tax free retirement income and retirement investments using their tax return. Maybe you are now receiving a large tax refund or not paying taxes at all because of the standard deductions. This gives you some wiggle room to do IRA to Roth IRA conversions while paying little or no taxes. Again, make sure you talk with your CPA, accountant, or contact me to discuss further before completing your Roth IRA conversion.

I hope this video blog has helped you on your retirement journey and answer the question, Who Should Convert An IRA to A Roth IRA. Thank you so much for reading and watching!

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Drew Blackston, CRC® & RFC®
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When it comes to retirement planning, one of the most popular questions is whether or not to convert an IRA to a Roth IRA. Converting an IRA to a Roth IRA can be a great way to save for retirement, but it’s important to understand the pros and cons before making a decision.

A Roth IRA is a retirement account that is funded with after-tax dollars and allows for tax-free withdrawals in retirement. This makes it an attractive option for those who anticipate earning more in retirement than they do now. Additionally, Roth IRAs offer more flexibility than traditional IRAs when it comes to withdrawals and contributions.

However, there are some drawbacks to converting an IRA to a Roth IRA. For starters, the conversion is considered a taxable event, which means you’ll have to pay taxes on the amount you convert. Additionally, converting an IRA to a Roth IRA can also reduce the amount of money you have available for retirement.

When deciding whether or not to convert an IRA to a Roth IRA, it’s important to consider your current financial situation and retirement goals. If you anticipate earning more in retirement than you do now, a Roth IRA could be a great way to save for retirement. However, if you anticipate earning less in retirement than you do now, a traditional IRA may be a better option.

Ultimately, the decision to convert an IRA to a Roth IRA should be based on your individual financial situation and retirement goals. It’s important to do your research and speak to a financial advisor before making a decision.