With the stock market appearing to head towards a–dare I say it–recession, now might seem like an odd time to talk about converting your traditional IRA to a Roth IRA. However, converting when the markets are low actually might be the best time to do so. When it comes to Roth IRA conversions, the tax bill for doing so is based on the value of your traditional IRA assets. Thus, when the markets are down, there’s a really good chance your IRA assets are down too, which means a lower tax number. As for the actual tax hit, as you Continue reading Have You Thought About a Roth Conversion?
A backdoor Roth IRA conversion can be tempting if you are considering retiring early and are currently over the income limits for a Roth IRA contribution. In case you are unfamiliar, a backdoor Roth IRA conversion is where you contribute money to a traditional IRA and then convert that money into a Roth IRA. This is a useful transaction for those who earn too much income to contribute to a Roth IRA as Traditional IRAs have no income limits. It’s also a perfectly legal transaction. However, when doing a backdoor conversion, keep in mind that the taxman will get his Continue reading The Cautions of Backdoor Roth IRA Conversions
Yesterday, I wrote about diversifying your retirement savings by having more than one type of retirement account. While such a concept is a good idea, it also needs to be done reasonably. While it’s okay to have more than one retirement account, it’s not a good idea to have multiple types of the same account or to have so many retirement accounts that you can’t keep track on them. If you find yourself in such a situation, you should consider streamlining your retirement accounts by doing a conversion or rollover so that you only have two, maybe three, accounts. Thus, Continue reading Organize Your Retirement Accounts Through Consolidation
You may not realize it, but there the money in your Roth IRA will be distributed in a particular order. The order is important as it will determine any potential tax consequences you may have when you take a distribution from your account. In a Roth IRA, there are generally four (4) classifications of assets within an account: (1) regular contributions, (2) taxable conversion and rollover amounts, (3) non-taxable conversion and rollover amounts, and (4) earnings on Roth IRA assets. Remember, that your contributions are tax-free, but that doesn’t mean that other money in the account is not taxable. Thus, Continue reading Following Orders: Your Roth IRA and Your Money
Have you been considering converting a traditional IRA to a Roth IRA? Well, if you want to do so and have the associated taxes count in 2018, you only have three (3) weeks left to do so. IRA conversions must be done by the end of the calendar year if you want them to count for 2018, which is particularly important if you want to take advantage of 2018 tax rates. If you do decide you want to make a conversion, make sure that it’s definitely something you want to do as recharacterizations are no longer allowed. The tax reform Continue reading Time is Running Out to Make an IRA Conversion This Year
If you’ve been saving for retirement over the course of decades, chances are you haven’t been using just one account. It’s not uncommon for people to have two, maybe even three or four accounts where they are accumulating parts of their nest egg. You may further find, during those years of saving, that you will move money between those accounts or roll/convert some accounts into others. These various types of transactions often have different rules and limitations (such as a waiting period before you can take a distribution of the funds or a limitation on the number of times you Continue reading Keep Track of Your Retirement Account Transactions!
It’s common knowledge among Roth IRA owners that if you make annual contributions to your Roth IRA, you can access those funds penalty-free at any time. It sounds simple, but people can forget that the rule only applies to annual contributions and that things can get tricky when it comes to converted funds. If you seek to access converted funds in a Roth IRA and are under age 59 ½, you must wait either 5 years before accessing those funds or until you reach age 59 ½. The holding period begins on January 1 for the year in which the conversion happened, Continue reading Beware of This Roth IRA 5-Year Rule
I’ve often talked here about the wisdom behind converting multiple IRAs into one or two accounts as you grow older. Mainly, that it makes it easier to manage your money and to prevent missed required minimum distributions (RMDs), which can result from juggling too many accounts. While consolidating IRAs into as few accounts as possible is still a good idea, today I’m going to talk about an area in which it just might be beneficial to have multiple IRA accounts, particularly Roth IRAs: estate planning. If you are interested in leaving bequests for heirs and family members, an IRA can Continue reading Estate Planning Benefits of Having Multiple IRAs
If you have a traditional IRA and a Roth IRA, you may have had the question arise regarding whether you intend to convert your traditional IRA to your Roth IRA. If you haven’t thought about it, maybe you should consider it. Before you decide to make such a move, though, you should take the time to understand just how a conversion works and what it may cost you. Keep in mind that the big difference between a Roth IRA and a traditional IRA is, in essence, that with a Roth IRA you pay taxes on the money when you make Continue reading The Big Thing Regarding Traditional to Roth IRA Conversions
If you are considering converting the funds in a traditional IRA to a Roth IRA, did you know that you can do so in small amounts over time? Thus, you do not need to make one big conversion. Breaking your conversion down into several partial conversions can be a good way to minimize tax costs since you will only have to pay taxes on each individual amount that you convert. It should be noted that you should be careful with conversions if you do so after you reach age 70 ½ because a conversion can get confused with a required Continue reading Thinking About an IRA Conversion? You Don’t Have to Convert the Whole Thing