Welcome
Checking My Account(s)
Who We Are
Our Services
FAQ's
Our Investment Policy
MAM Newsletters
Financial Articles
Featured News
Financial Briefs
Articles Of Interest
Research & Tools
MAM Webinars
White Papers
Contact Us
Disclosure

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
How To Spell Estate Tax Relief
Watch Out For "Grandparent Scams"
ETFs Can Provide Some Other-Worldly Benefits To Investors
Four Tax Strategies In Retirement
This Tax-Free Rollover Goes Right To Charity
Why Turn Down An Inheritance?
Do You Deserve A High Grade In Financial Literacy?
Six Tax Items For Small Businesses
How Now, Dow Jones Industrials?
Five Steps When You Inherit Assets
Getting A High Tax Grade For Higher Education Credits
Five Retirement Questions To Answer
Q's And A's About Financial Aid
One Last Shot At A Tax Exemption
Taking Socially Responsible Investing To The Next Level
How You Can Manage Risk Aversion

This article was written by a professional financial journalist for McCarthy Asset Management, Inc. and is not intended as legal or investment advice.

©2017 Advisor Products Inc. All Rights Reserved.