Tax Talk: Is a Roth IRA Conversion Right for You this Year?

By Brendan Hughes2 Comments

IRA brochureIf you have a traditional IRA, you might benefit from converting some or all of it to a Roth IRA. A conversion can allow you to turn tax-deferred future growth into tax-free growth. It also can provide estate planning advantages: Roth IRAs don’t require you to take distributions during your life, so you can let the entire balance grow tax-free over your lifetime for the benefit of your heirs.

There’s no income-based limit on who can convert to a Roth IRA. However, keep in mind the converted amount is taxable in the year of the conversion. Another factor to consider are the contribution limits which are associated with your modified adjustable gross income (MAGI).  Whether a conversion makes sense for you depends on factors such as:
  • Your age
  • Whether the conversion would push you into a higher income tax bracket or trigger the 3.8% net investment income tax
  • Whether you can afford to pay the tax on the conversion
  • Your tax bracket now and expected tax bracket in retirement
  • Whether you’ll need the IRA funds in retirement.
Set up a free one-on-one IRA checkup with an Equity Trust Senior Account Executive to review your specific situation and see if a conversion is the right move for you.

Source: Thompson Reuters