With a traditional IRA, you may qualify for a tax deduction when you invest your money. But later, when you take the money out in retirement, all those distributions are taxed.
The Roth IRA is the opposite. It has no deduction when you put the money in, but later, all distributions are tax-free when you take the money out during retirement.
By converting from a traditional IRA to a Roth IRA, future gains become tax-free. But when you convert funds from a traditional IRA to a Roth IRA, you must pay taxes on the converted amount that year.
You can choose to convert all or just part of a traditional IRA to a Roth IRA. Timing should be based upon when you are in a lower tax bracket or have other offsetting deductions.
We can help you gauge the costs and benefits of a Roth conversion in your situation. Beware of penalties if you may need to tap into your Roth IRA funds in the next five years and you are or will be younger than age 59 1/2 when you need these funds.
Give us a call today and we’ll help you evaluate your options. It’s important that all investment titling and beneficiary designations are working in concert with your will or other estate planning documents. Speak with your estate and tax planning professionals to evaluate any potential tax ramifications and call us today to learn more about strategies and resources that may help you preserve your nest egg.
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About Andy
Andrew Tapparo is a fee-only financial advisor at Tapparo Capital Management, a financial planning firm in Topsfield, MA, helping clients turn their savings into a retirement income that lasts. Inspired by the quote “Choose a job you love, and you will never work a day in your life,” Andy founded Tapparo Capital Management in 1997 with a passion for helping clients enjoy a truly worry-free and fulfilling retirement and experience financial freedom. As a Retirement Income Certified Professional (RICP®), he designs retirement strategies along with sound money management to help clients retire with confidence.
Andy holds a Bachelor of Science in Industrial Engineering from Rochester Institute of Technology in Rochester, New York, and a Master of Science in Finance from Bentley University in Waltham, Massachusetts. Specializing in retirement income planning, Andy completed a comprehensive financial industry education program at The American College of Financial Services and was awarded the Retirement Income Certified Professional® designation. He is frequently quoted in the media as a financial expert.
Andy and his wife, Susan, live in Topsfield, Massachusetts, and have two beautiful daughters. Outside of work, he is an automobile enthusiast, enjoys taking road trips, and loves the Outer Banks of North Carolina. In his spare time, he volunteers with the local high school varsity girl’s basketball team as the team statistician and runs the team’s website. He is passionate about supporting charities that serve our veterans and their families. To learn more about Andy, connect with him on LinkedIn.
