A Smart Move for Retirement Planning

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As we plan for a confident retirement, one strategy worth considering is a Roth IRA conversion. This involves moving money from a Traditional IRA or 401(k) into a Roth IRA—essentially trading tax-deferred savings for future tax-free income.

Why consider a Roth conversion? While you will pay income tax on the amount you convert, that money then grows tax-free and can be withdrawn tax-free in retirement (as long as certain conditions are met). Plus, unlike Traditional IRAs, Roth IRAs do not have required minimum distributions (RMDs), giving you more flexibility and control over your retirement income.

A Roth conversion can be especially helpful if:
· You expect to be in a higher tax bracket in the future
· You have a few low-income years before starting Social Security or RMDs
· You are looking to leave tax-efficient assets to heirs

However, Roth conversions must be completed by December 31st to count for the current tax year—unlike IRA contributions, which can often be made up until the tax filing deadline. Waiting too long could mean missing a key window of opportunity.

Ultimately, Roth conversions can be a smart move—but they require careful planning. Converting too much in one year could bump you into a higher tax bracket or impact Medicare premiums. We recommend discussing this strategy as part of your broader financial plan.

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