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  • Helen Raleigh

How to Do the Roth Conversion Right


Roth conversion has become popular in recent years as clients seeking different ways to manage their retirement income taxes. A Roth conversion will reduce the balance of your traditional IRA before required minimum distributions (RMDs) begin after you reach 72-years old—thus reducing the RMDs you have to take and income tax you have to pay on them. But when do it wrong, ROTH conversion may cost you more money than you are prepared for.


Since traditional IRAs are funded with pre-tax dollars, you must pay income taxes when you convert a portion of your IRA to a ROTH. Therefore, it is important to do some calculations to select the right amount to convert. How to define the right amount? 1. The conversion won't put you in a higher tax bracket. 2. You have sufficient tax payment set aside to pay for the conversion.


One of the many benefits of a ROTH is that it is not subject to RMD so you can keep your money in ROTH growing as long as you wish. Therefore, when you convert assets from a traditional IRA to your ROTH, you should move the type of assets that have the most growth potential, such as technology stocks. Leave the bonds and other low growth potential assets in your traditional IRA.


Roth conversions can be complex. Always seek help from investment professionals if you are not sure how to do it right.



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