March 18, 2019
Sarah D. Buenger, MPAS®, MSPFP, CFP®
Director of Financial Planning
Should you convert to a Roth IRA? Although this seems to be a straightforward question, the answer is anything but. Two articles this time address some of the points about a Roth IRA conversion. Ultimately the planning behind deciding on whether to convert is a little more complex including:
Assuming a conversion makes sense, the next step is to figure out the most beneficial time to complete the conversion. Ideally earlier in the year is best since all the (assumed) growth in the investments will occur in the tax-free Roth IRA instead of in the tax-deferred IRA. However, beginning in 2018, recharacterization of conversion amounts is no longer possible, meaning that there are no “do overs” regarding the amount converted. Translated, it is now more important than ever to ensure that the amount converted is the right amount. How do we do that?
First and foremost, we work with you to project the taxable income for the year. Using the projection, it is possible to calculate the minimum Roth conversion that will work best for your situation to keep you in the desired tax bracket. Finally, we look at timing of the conversion to see what the most beneficial strategy for you would be, given the expectations in the market, and given the certainty or uncertainty of expected income and deductions.
If you have questions about Roth IRA conversions or any other planning matters, please give me a call at (866) 694-9100 or email email@example.com.
1) Fidelity Viewpoints 'Traditional or Roth IRA?' 06 February 2019, https://www.fidelity.com/viewpoints/retirement/traditional-or-roth-ira?ccsource=email_weekly.
2) Taylor, Debra. 'Roth Conversions Under the New Tax Act: 4 Key Changes You Must Know About' 13 August 2018, https://www.horsesmouth.com/roth-conversion-under-the-new-tax-act-4-key-changes-you-must-know-about.