• Tax-Free Growth & Withdrawals: Once in a Roth IRA, funds grow tax-free, and qualified withdrawals in retirement (after age 59½) are not subject to income tax.
• No Required Minimum Distributions (RMDs): Unlike Traditional IRAs, Roth IRAs do not require minimum withdrawals at age 73, allowing your savings to continue growing.
• Lower Future Tax Liability: If you expect to be in a higher tax bracket in retirement, converting now can reduce the taxes you’ll pay later.
• Low-Income Years: If you anticipate lower income in a given year—such as during early retirement or a career transition—you can take advantage of lower tax rates on the conversion.
• Market Downturns: Converting when investment values are lower means paying taxes on a reduced balance, maximizing future tax-free growth.
• Before Required Minimum Distributions (RMDs) Begin: Converting before age 73 can help reduce taxable distributions later on.
• Convert in Smaller Increments: Converting too much at once may push you into a higher tax bracket. Instead, spread conversions over several years.
• Use Tax-Free Funds to Pay Taxes: Avoid paying conversion taxes with money from the IRA itself—use cash savings instead.
• Time Conversions Strategically: If tax rates are expected to rise, converting earlier could be advantageous.
• Individuals expecting higher tax rates in retirement.
• Those who want to leave tax-free inheritance to heirs.
• Investors seeking more flexibility in retirement withdrawals.
Final Thoughts: Roth conversions can provide substantial long-term tax savings, but timing and tax implications must be carefully considered. Need guidance on whether a Roth conversion is right for you? Our tax professionals can help create a strategy that aligns with your financial goals.
