Carl has about $35k in a traditional IRA. He’s thinking about transferring these funds into a Roth IRA to avoid a tax penalty down the road. Carl would like to know how much he should transfer and if that transfer will count as “earned income” at the end of this year.

Original airdate: March 18, 2018 – Hour 1, Call 3.

Wes Moss is the host of MONEY MATTERS – the country’s longest-running live call-in, investment and personal finance radio show – on News 95-5FM and AM 750 WSB.

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Please note, this information is provided to you as a resource for informational purposes only and should not be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions….(read more)

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Is It A Good Time To Convert My Traditional IRA To A Roth IRA?

A Roth IRA has become an increasingly popular retirement savings vehicle for many individuals. Unlike a traditional IRA, contributions to a Roth IRA are made with after-tax dollars, meaning that withdrawals in retirement are tax-free. This unique tax advantage has led many individuals to consider converting their traditional IRA to a Roth IRA. However, the decision to convert should be carefully thought out, considering various factors. One crucial factor is the timing of the conversion.

The timing of a Roth IRA conversion depends on several factors that are specific to your individual financial situation. One such factor is your current tax bracket. Converting to a Roth IRA means paying taxes on the converted amount. If you are currently in a lower tax bracket and expect to be in a higher bracket in retirement, it might be wise to convert now, when you will pay taxes at a lower rate. Conversely, if you are currently in a higher bracket and anticipate being in a lower tax bracket in retirement, it might be best to delay the conversion.

Another important consideration is the market performance. When you convert a traditional IRA to a Roth IRA, the value of the assets is considered taxable income in the year of conversion. If the market is performing well and the value of your traditional IRA has appreciated significantly, it might be a good time to convert. On the other hand, if the market is experiencing a downturn, it might be worth waiting until the assets recover before converting.

Additionally, your current financial situation should be taken into account. If you have enough cash on hand to cover the tax bill resulting from the conversion, it may be advantageous to convert now. However, if the conversion would cause significant financial strain, it might be better to delay until you are in a better position to handle the tax liability.

It is vital to consult with a financial advisor or tax professional before making any decisions regarding a Roth IRA conversion. They can help you analyze your specific circumstances and advise you on the best course of action. They can also assist in estimating the tax implications of the conversion and provide guidance on other potential benefits or drawbacks of converting.

Furthermore, it is crucial to understand that a Roth IRA conversion is irreversible. Once the conversion is complete, you cannot undo it. Therefore, careful consideration and planning are necessary to ensure that a conversion aligns with your long-term financial goals.

In conclusion, determining whether it is a good time to convert your traditional IRA to a Roth IRA involves considering factors such as your current and future tax bracket, the performance of the financial markets, and your overall financial situation. Consultation with a financial advisor or tax professional is highly recommended to make an informed decision and to ensure that a Roth IRA conversion is appropriate for your individual circumstances.