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
More Flexibility Allowed In Flex Spending Accounts
When To Disclaim An Inherited IRA
Trust As IRA Beneficiary: Not Crazy
Tax Reform Outlook: Cloudy, With Good Chance Of A Law
Sowing Tax Seeds For Capital Gains
Grandparents Can Become Big Spenders For Their Offspring
Sticking With The Fundamentals
What Would Estate Tax Repeal Mean?
Timely Tax Angles To Dividends
Fate Of Fiduciary Rule Is Uncertain, But Count On Us
Are You Planning To Unleash The Dogs Of The Dow?
5 Retirement Mistakes You Can Fix
The Best Places In The Country To Retire
This Plan Is Just For Nonprofits
Sidestepping A Life Insurance Trap
Teach Employees About Computer Scams

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.