We have approximately 40 days left to consider a Roth conversion for 2018 (these must be completed by December 31st each year and we prefer December 20th).
It’s generally a good idea for investors to consider including a Roth IRA in their overall retirement planning. Roth IRAs have the potential to grow tax-free, which may help you save more over time. Plus, withdrawals aren’t mandatory during the lifetime of the original owner, and Roth IRA assets may pass to your heirs tax-free.
If this strategy isn’t a fit, there are other ways to find tax free income.
Converting to a Roth IRA is easier than ever. You can transfer some or all of your existing balance in a traditional IRA to a Roth IRA, regardless of income (but income-eligibility restrictions still apply to current-year contributions). There is also no magic age on this one. You’re never too old or too young to take advantage of this.
You can convert all or part of other retirement accounts, such as an employer-sponsored 401k or 403b plan, too. Once you leave your job, or in some cases, even while you continue to work for the same employer, you can do a Roth conversion. Some plans allow you to access the money while you are still working, known as an “in-service distribution”, but you usually have to reach a certain age before you can do so.
If your earnings are too high to prevent you from contributing directly to a Roth IRA, you can use a Roth conversion as a back door entry into future tax-free income in retirement.
You also have the option to re-characterize the conversion which allows you to “undo” or “reverse” a rollover or conversion to a Roth IRA if you should need to.
If this sounds like it might be an option this year, give me a call. There are other considerations before we make the change. However, one of the most powerful performers in the 2nd Half is tax-free income.
Citations
1 https://2ndhalfwealth.com/roth-conversion/
