Today on the show, we discuss the 5 effects of Roth conversions. A Roth conversion is a process of moving funds from a traditional Individual Retirement Account (IRA) or a qualified retirement plan (like a 401k) to a Roth IRA.
This conversion means that the account holder will owe income taxes on the converted amount, but once the conversion is complete, all future earnings and withdrawals from the Roth IRA will be tax-free.
This can be a useful strategy for people who believe they may be in a higher tax bracket in the future or want to have tax-free retirement income. We discuss the 5 effects of Roth conversions and how they can play into a tax-efficient retirement plan.
- The difference between “taxed now” and “taxed later”
- Using taxable dollars to buy more Roth dollars
- How Roth conversions can possibly lower RMDs
- Setting up fewer taxable dollars on your balance sheet
- Integrating your retirement plan with your tax planning – comprehensive retirement planning