Six reasons to consider converting your IRA to a Roth IRA
This strategy could potentially give you more income flexibility and help save you money.
Brad Cooper, Cooper Financial
Imagine entering retirement with tax-free income and no required minimum distributions.
That’s what a Roth IRA can offer if you convert from a traditional IRA or 401(k). A Roth
isn’t right for everyone, but here are six reasons it may be worth considering.
1. You’re concerned about future tax hikes.
Once you’re 59½ and your Roth is at least five years old, qualified withdrawals are tax-free. If tax rates rise, your Roth withdrawals won’t increase because you’ve already paid taxes at today's rate. Your beneficiaries can also inherit Roth funds tax-free.
2. You want control over when you pay taxes.
Withdrawals from tax-deferred accounts like traditional IRAs are taxable. A Roth allows you to pay taxes upfront and withdraw funds tax-free in retirement. If you expect to be in a higher tax bracket later, converting earlier may save you money. However, if you expect lower taxes in retirement, converting may not be beneficial.
3. No required minimum distributions (RMDs).
Unlike traditional accounts, Roth IRAs don’t require RMDs, giving you greater control over timing withdrawals and allowing money to potentially continue growing.
4. Current tax rates are set to rise.
Tax cuts from the 2017 Tax Cuts and Jobs Act expire in 2026. Converting before rates go up may reduce your long-term tax burden.
5. Tax diversification matters.
Having both taxable and tax-free income sources can reduce retirement withdrawals, minimize taxes on Social Security, and help preserve assets.
6. Market downturns may offer an opportunity.
If markets drop, converting a reduced account balance means paying taxes on a lower amount, then allowing future recovery to grow tax-free.
To connect with a Financial Professional at Cooper Financial Investments, please call 480-269-9444 or visit: www.CooperFinancial.com