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Seth Stewart With Brookstone Financial Is Now the Time to Convert Your Traditional IRA or 401K to Roth?
November 15, 2023
In today’s dynamic financial landscape, the specter of a soaring national debt and potential future tax hikes has led many individuals to rethink their retirement savings strategies. Financial advisor Seth Stewart of Brookstone Financial in Jeffersonville, IN, highlights the growing concern about the possibility of increased taxes in the future. Given this, many are now wondering if the time is right to explore the option of converting their traditional IRA or 401(k) to a Roth account.
A Roth conversion involves transferring funds from a tax-deferred retirement account, like a traditional IRA or 401(k), into a Roth IRA. Unlike traditional accounts, Roth IRAs offer tax-free withdrawals in retirement, providing valuable advantages in an environment where taxes may be on the rise.
One of the primary motivations behind considering a Roth conversion, as Seth Stewart points out, is the potential for tax savings down the road. By paying taxes on the converted amount now, you can take advantage of current, potentially lower tax rates, and avoid paying taxes on your withdrawals during retirement. This can be particularly advantageous if tax rates do indeed increase in the future.
Moreover, Roth IRAs don’t have required minimum distributions (RMDs) during the account holder’s lifetime, offering flexibility and control over your retirement income. This can be a game-changer for retirees who want to manage their tax liability and leave a legacy for their heirs.
It’s important to note that the decision to convert to a Roth should be carefully evaluated, taking into account your current financial situation, tax bracket, and retirement goals. While Roth conversions can be advantageous, they involve immediate tax consequences, and it’s crucial to ensure that you have the necessary funds to cover the tax bill associated with the conversion.
Seth Stewart recommends consulting with a financial advisor to assess your specific circumstances and determine if a Roth conversion aligns with your long-term financial objectives. Timing and strategy play a significant role in this decision, and it’s essential to have a comprehensive plan that considers your entire financial picture.
In conclusion, the national debt and the potential for future tax increases have brought the advantages of Roth conversions into sharper focus. Now is the time to evaluate your retirement savings strategy and determine if converting your traditional IRA or 401(k) to a Roth is a smart move for you. By making an informed decision today, you can potentially enjoy tax savings and greater financial security in your retirement years.