What is a Roth Conversion?
A Roth Conversion is a process that systematically transfers your taxable IRA into a tax-free Roth IRA. A taxable event occurs each time a portion of the IRA is converted, which means careful planning must be involved to minimize the current tax obligation.
How do I convert my IRA to a Roth?
The accountants at Montini and Farrah Tax Advisory Group will create a tax model for you prior to year-end. This tax model will show us how much of your IRA can be converted for the year, while keeping you under the next tax threshold or bracket. This systematic planning process will minimize the immediate tax consequences.
Why should I convert to a Roth IRA?
The first reason to convert into a Roth IRA is to minimize the effect of required minimum distributions(RMDs) when you turn age 70 ½. The RMD percentage starts at 3.65% and increases each year. The RMD could bump you into the next tax bracket and effect how much of your social security benefits will be subject to tax.
The second reason to convert is our belief in the potential rise in tax rates in the near future. With $19 trillion in debt, it’s not out of question to expect higher taxes in the future. If you can endure a little pain today, you can place yourself in a more tax favorable position in the future.
Start Planning Today
The younger we start the conversion process, the more of your IRA we can convert into the tax-free Roth IRA.
You can learn more at www.montinico.com or email me at firstname.lastname@example.org for a Roth conversion consultation.
Marc Montini has 20 years of experience in financial services.