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Is a Roth IRA Conversion Right for Me? - YouTube
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hello my name is sean sweeney and i'm an
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investment advisor representative
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and retirement income certified
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professional with cetera investors
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and today we're going to be discussing
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roth ira conversions
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[Music]
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a roth ira conversion is the name given
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to a special type of transaction
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where you move money from your pre-tax
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retirement account
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like an ira 401k or 403b to a roth ira
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when you make a roth conversion the
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amount of money you convert is added to
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your tax return for the year
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and is taxable at whatever income tax
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bracket you happen to be
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in for example let's say jill has 100
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000 in a traditional ira and would like
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to convert it to a roth ira
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we'll talk more about why she might want
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to do this in a moment but if jill moves
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forward with her 100 000
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roth ira conversion she'll have to add
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100 000
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of income to her tax return for that
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year which will be taxable whatever tax
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rate jill happens to be at
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please remember if you're over 59 and a
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half
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and you've had any roth ira for more
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than five years
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then all withdrawals from any of your
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roth iras will be tax and penalty free
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for life
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if you're over 59 and a half but haven't
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had a roth ira for five years yet
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you can still take out any of your
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converted amount
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tax and penalty free at any time if
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you're younger than 59 and a half
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other rules apply needless to stay
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because
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this is a big decision and can have a
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significant impact on your taxes
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it's always best to discuss this option
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with your tax and financial
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professionals beforehand
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so why would you voluntarily choose to
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make one of these roth ira conversions
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and pay taxes before you have to well
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there are a lot of reasons but perhaps
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the most common reason is one we've
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already discussed
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to pay off uncle sam now so that you own
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your retirement account
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free and clear for the rest of your life
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remember with the roth ira you have the
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potential for future tax free
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withdrawals
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of everything in your account something
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else to keep in mind is that
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unlike roth ira contributions there are
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no restrictions on who can make roth ira
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conversions
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you can't be too old you can't be too
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young you can be working
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or you can be retired there's no minimum
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amount of income you need
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or a maximum amount of income you can
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have
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i think you see what i mean here if you
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want to convert your ira to a roth ira
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there is nothing in the tax rules that
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will stop you from doing so
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the potential tax-free nature of the
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roth ira may also provide you with
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additional benefits
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such as a hedge against tax rates rising
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in the future
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when it comes to your retirement there
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are a lot of unknowns
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what will the market do what will
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inflation be like what will your tax
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rate be
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and so on but that last one taxes
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is a major concern for many retirees and
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one
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we've already talked about a little bit
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a roth ira conversion can help
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manage that risk by paying taxes at
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today's
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known rates if tax rates rise in the
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future
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tax-free distributions from the roth ira
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will be even more
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valuable of course if you think that
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your tax rate will be lower
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in retirement then that would be an
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indication that maybe this strategy
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isn't the right one for you
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also since roth ira distributions and
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retirement are generally tax free
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they typically don't impact other
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aspects tied to your income
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such as taxes on social security another
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big benefit of the roth ira
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and one that many retirees find
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attractive is that roth iras have no
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required minimum distributions during
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your lifetime
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all those rmd calculations and potential
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mistakes we talked about
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they are not an issue if you have a roth
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ira
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during your lifetime you can take as
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much or as little as you want
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that means that your roth ira can
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continue to grow
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and compound tax-free for your heirs
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which also makes it a very intriguing
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vehicle from an estate planning
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perspective
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i hope that this video was a helpful
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place to start but i will be getting a
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lot more in depth in the upcoming ira
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online workshops that i host live on a
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regular basis
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so if you have questions about the best
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way to time your roth ira conversions
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yes i will be discussing that just click
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the link below to see the full schedule
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of my upcoming workshops
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on this and other important topics if
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you have more specific questions related
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to your own personal situation
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i'm happy to schedule a one-on-one
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consultation with you
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the first one is free but out of respect
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for my current clients who pay me
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i will only be doing one free
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consultation per household
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thank you and see you next time
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[Music]
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you
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