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On the bright side, this may be a good opportunity to convert 401(K) or IRA funds into a ROTH account.
by rtp4me 2y ago
On the bright side, this may be a good opportunity to convert 401(K) or IRA funds into a ROTH account.
- huevosabio 2y agoWhy?
- eclipticplane 2y agoYou owe tax on the difference between contributed dollars and converted dollars. So if you contributed $100 and it historically had grown to $150, you would owe tax on $50 to convert. If that $150 in value is suddenly $120 instead, your tax bill to convert is significantly cheaper.
- joshuamcginnis 2y agoROTH contributions grow tax-free. Doing your conversions now allows you to buy equities are they're currently discounted prices, maximizing your potential long-term tax-free gains.
- rtp4me 2y agoEspecially if you hit the RMD threshold in retirement. Even more important is how RMDs affect Medicare premiums(1). The best advice I have is to avoid RMDs as much as possible since they can/will affect other parts of your retirement strategy. Thus, converting to ROTH today may save you lots of cash in the future. (1) https://www.fedsmith.com/2024/10/23/rmds-are-silently-increasing-medicare-premiums/ https://www.fedsmith.com/2024/10/23/rmds-are-silently-increa...
- cortesoft 2y agoBecause you have to pay taxes on it when you convert, and you will have less to pay taxes on if you do it now.
- dgunay 2y agoRebuy equities/reinvest dividends at reduced prices, pay taxes now, enjoy tax-free growth. If the current admin is serious about trying to get rid of income tax, then that would eliminate a major advantage of trad vs roth.
- Ancalagon 2y agoLower absolute taxes