Can you predict the future? No? Don’t feel bad, most of us can’t. But there is something you can do that is a sure thing when it comes to safeguarding your hard earned retirement funds. Curious yet?
This week on the David Lukas show, David talks about the advantages and disadvantages of converting your 401k or IRA into a Roth IRA. Throughout the hour David explains how some experts believe it’s a no brainer. Not only could you save thousands of dollars in taxes but A ROTH IRA could also offer many other significant advantages that you don’t get from your current IRA or 401K.
The main question is: To convert or not to convert to a Roth IRA?
Perks to a Roth IRA:
- Tax free income in retirement
- No required distributions (in fact you NEVER have to withdraw, leaving a tax free inheritance to beneficiaries).
- Potential minimization or elimination of taxation of Social Security Benefits
Tune into to hear David talk about Roth IRA conversions as a part of a pro active tax-strategy in retirement. Listen to the entire episode today!
What Is A Roth IRA?
A Roth IRA is a special retirement account where you pay taxes on money going into your account and then all future withdrawals are tax free.
Like beauty, the benefit of a Roth IRA is in the eye of the beholder and it all depends on the beholder’s tax bracket–both now and when he or she retires. Although there is no up-front tax deduction for Roth IRA contributions as there is with a traditional IRA, Roth distributions are tax-free when you follow the rules. And because every penny you stash in a Roth IRA is your money—not a tax-subsidized gift from Uncle Sam—you can tap your contributions (but not your earnings) any time tax-free and penalty-free.
Roth IRAs make the most sense if you expect your tax rate to be higher during retirement than your current rate. That makes Roth IRAs ideal savings vehicles for young, lower-income workers who won’t miss the upfront tax deduction and who will benefit from decades of tax-free, compounded growth. Roth IRAs also appeal to anyone who wants to minimize their tax bite in retirement as well as older, wealthier taxpayers who want to leave assets to their heirs tax-free.
You can contribute to a Roth IRA at any age as long as you have earned income from a job. (Info via rothira.com)
Some people if they make too much income may not be able to contribute to a ROTH. This is where a ROTH conversion can be very beneficial as there is no income limit to convert to a ROTH.
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