If you are like many professionals in today’s workforce, chances are you have a 401(k) or two that remains with a prior employer.  Perhaps you have created self-directed IRAs with your former company sponsored retirement plans.

A systematic Roth conversion of these 401(k)s or Rollover IRAs could potentially prove beneficial to you as part of your income plan for retirement.  Individuals sometimes think they cannot qualify for a Roth Conversion because of the IRS income limitations associated with IRAs.  Roth Conversions, however, do not have income limitations. 

Many factors weigh into the equation of whether or not a conversion of your existing retirement funds to a Roth IRA makes sense for your individual retirement plan.  There is no way to make a generalization about starting a Roth conversion program.  An individual consultation with me and your tax professional would be a good way to start evaluating Roth Conversions as part of your retirement income and tax strategy. 

When retirees have a regular IRA or 401(k) plan that is being used to generate retirement income, there are a few potential pitfalls that can come in to play.  For example, if there is a year when there are high medical expenses, this may require an increase in distributions from qualified plan assets to pay these medical expenses.  This will increase Modified Adjusted Gross Income, thus, increasing the taxes that need to be paid.  Presently, individuals or couples can deduct about 10% of their medical expenses, but this 10% number is based on AGI.  If AGI goes up because of distributions from a 401(k) or IRA to pay medical expenses, the 10% number becomes a higher bogey to reach.  If medical expenses are coming from an account where AGI is not impacted as much (such as a Roth IRA), it is probably a better situation for the long run.  I want to disclose that I am not a tax accountant.  Together, we can collaborate with your trusted accounting professional to evaluate the impact and benefit of a Roth conversion for your long-term benefit. 

When you consider the number of years you have until retirement and the compounding factor of having a Roth account that you will never have to pay any taxes on during your distribution years, as well as for legacy planning, a Roth conversion can be compelling.  Just keep in mind, once a Roth conversion takes place, the conversion is irreversible. 

If you have money sitting in a 401(k) from a prior employer, or in a self-directed IRA, let’s have a conversation about crunching some numbers to see if a Roth Conversion is right for you and your retirement income strategy.

Roth and Roll!

If you are like many professionals in today’s workforce, chances are you have a 401(k) or two that remains with a prior employer.  Perhaps you have created self-directed IRAs with your former company sponsored retirement plan.

A systematic Roth conversion of these 401(k)s or Rollover IRAs could potentially prove beneficial to you as part of your income plan in retirement.  Individuals sometimes think they cannot qualify for a Roth Conversion because of the IRS income limitations associated with Roth IRAs.  Contributing to a regular IRA has income limitations.  Roth Conversions do not have income limitations. 

Many factors weigh into the equation of whether or not a conversion of your existing retirement funds to a Roth IRA makes sense for your individual retirement plan.  There is no way to make a generalization about starting a Roth conversion program.  An individual consultation with me and your tax professional would be a good way to start evaluating Roth Conversions as part of your retirement income and tax strategy. 

When retirees have a regular IRA or 401(k) plan that is being used to generate retirement income, there are a few potential pitfalls that can come in to play.  For example, if there is a year when there are  high medical expenses, this may require an increase in distributions from qualified plan assets to pay these medical expenses.  This will increase Modified Adjusted Gross Income, thus, increasing the taxes that need to be paid.  Presently, individuals or couples can deduct about 10% of their medical expenses, but this 10% number is based on AGI.  If AGI goes up because of distributions from a 401(k) or IRA to pay medical expenses, the 10% number becomes a higher bogey to reach.  If medical expenses are coming from an account where AGI is not impacted as much (such as a Roth IRA), it is probably a better situation for in the long run.  I want to disclose that I am not a tax accountant.  Together, we can collaborate with your trusted accounting professional to evaluate the impact and benefit of a Roth conversion for your long-term benefit. 

When you consider the number of years you have until retirement and the compounding factor of having a Roth account that you will never have to pay any taxes on during your distribution years….as well as for legacy planning, a Roth conversion can be compelling.  Just keep in mind, once a Roth conversion takes place, the conversion is irreversible. 

If you have money sitting in a 401(k) from a prior employer, or in a self-directed IRA, let’s have a conversation about crunching some numbers to see if a Roth Conversion is right for you and your retirement income strategy.

Roth and Roll!