Roth IRAs are great, but depending on your financial situation, they may not be the best investment option for you. In this video, we discuss three reasons why you might consider NOT Roth converting in 2023.

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Timestamps:
00:00 Roth IRAs are great, but they’re not always the best option
00:32 1. Consider your future tax bracket
02:11 2. Legacy planning
03:07 3. You’re charitable-minded

Disclaimer: Since we do not know your specific situation, none of this information can serve as tax, legal, financial, insurance, or financial advice, and may be outdated or inaccurate. The information comes from sources believed to be reliable but cannot be guaranteed. This content is prepared for educational purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Peak retirement planning, Inc. is an Ohio based registered investment adviser and able to offer advisory services in Ohio and in other states where registered or exempt from registration….(read more)

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As the year 2023 approaches, many investors are considering whether to convert their traditional IRAs to Roth IRAs. While Roth conversion can have several benefits, there are also some reasons why it may not be the right choice for everyone. In this article, we will discuss three reasons why you should not Roth convert in 2023.

1. High tax rates

One of the key factors to consider when deciding whether to Roth convert is the tax rate. Roth conversion involves paying taxes on the amount of money you convert from your traditional IRA to your Roth IRA. If your tax rate is high, this can significantly decrease the amount of money you’ll have left in your account after conversion, potentially offsetting the benefits of the conversion.

In 2023, tax rates are expected to remain high due to the ongoing pandemic recovery efforts. Therefore, if you expect your tax rate to stay high or increase, it may not be the best time to Roth convert.

2. Limited time horizon

Another important consideration is your time horizon – how many years you have until retirement. Roth conversion can be beneficial for investors with a long time horizon as it allows them to grow their retirement savings tax-free over several decades. This can result in significant savings in taxes and higher retirement income.

However, if you have a limited time horizon, Roth conversion may not be as advantageous. For example, if you plan to retire in the next few years, the tax savings from Roth conversion may not be enough to justify paying higher taxes now.

3. Insufficient funds

Finally, if you do not have sufficient funds in your traditional IRA, Roth conversion may not be a good idea. Roth conversion requires you to pay taxes on the entire amount you convert. If you do not have enough money in your traditional IRA to cover the taxes, you may have to dip into your savings or investments to cover the additional amount. This can result in a reduction in your overall retirement savings.

In conclusion, although Roth conversion can have several benefits, it may not be the right choice for everyone. If you’re considering Roth conversion in 2023, it’s essential to consider your tax rate, time horizon, and the amount of money you have in your traditional IRA. Before making any decisions, it’s best to consult with a financial advisor to determine the best strategy for your individual circumstances.