Home
Financial Management Services
Who We Are
Resources
Market Data Bank
Financial Briefs
Stock Quotes
Problem Solvers
Web Resources
Client Forms
Learning Center
Account Lookup
Disclosure
Event Calendar
Contact Us
Tell A Friend

Financial Briefs

More Articles  Printer Friendly Version

 

Convert To A Roth IRA Now To Avoid Higher Taxes Later?

Should you convert your traditional IRA to a Roth IRA? A key factor in this decision is taxes. If you expect to be in a higher tax bracket during retirement than you are now, a conversion may make perfect sense. But if you anticipate being in a lower tax bracket then, you could decide to sit tight.

With a traditional IRA, contributions may be wholly or partially deductible, but distributions generally are taxed at ordinary income rates. You never can deduct Roth contributions, but payouts from a Roth after five years are tax-free if you've reached age 59½ by then. The trick is to figure out whether the promise of future tax-free distributions is worth the current tax price on a conversion. The amount you convert will be treated as a distribution and taxed at your rate for ordinary income.

As you weigh your options, don't overlook the favorable tax rates for joint filers. For instance, a taxable income of $200,000 puts you in the 33% bracket as a single filer, but if you're married, that same income level puts you in only the 28% bracket as a joint filer. Remember, though, that if one spouse is significantly older than the other or in ill health, a surviving spouse may end up paying higher tax in retirement as a single filer. Similarly, an inheritance could push you into a higher bracket at that point.

Consider the tax variables carefully. They could create an incentive to convert to a Roth before your golden years.


Email this article to a friend


Index
Tax Reform Outlook: Cloudy, With A Chance Of A Law
Federal Estate Tax Reduced, But What About State Taxes?
Using RMDs To Buy Life Insurance
New Opportunity For Stand-Alone HRAs
5 'Other' Retirement Saving Ideas
Tax Rules For Collectible Donations
What Are The Main Items On Trump's Tax Reform Agenda?

This article was written by a professional financial journalist for A & M Tax and Accounting Services, Inc and is not intended as legal or investment advice.

©2017 Advisor Products Inc. All Rights Reserved.

Securities offered through Cetera Advisors LLC, member FINRA/SIPC.  Cetera is under separate ownership from any other named entity.


Check the background of this investment professional on FINRA BrokerCheck