I want to do a Roth conversion from my traditional IRA in the amount of $250,000. It’s my understanding that I have to pay the income tax on the $250,000. Can that tax be paid from the funds in the IRA or do I have to pay the tax outside of the IRA? – Kevin This one is straightforward. The IRS doesn’t care where the money comes from. As long as you cut them a check they’ll be happy! All kidding aside – yes, the $250,000 is included in your gross income. You can pay the tax bill using either the converte ...

Converting your 401(k) to a Roth portfolio will allow you to entirely avoid RMDs. This is a legitimate form of tax planning. However, often there’s a difference between whether you can do something and whether you should; whether it’s allowed, and whether it’s in your long-term best interest. For example, say that you’re 62 years old. You have $1.6 million in a 401(k). If you convert this portfolio to a Roth IRA 10% at a time, you can avoid required minimum distributions on your $1.6 million. However, par ...

Core Insights - The article emphasizes the importance of accounting for all potential expenses in retirement planning, including discretionary spending and emergency savings, to ensure a comfortable retirement [1] - It highlights the significance of investment strategy, noting that both the amount invested and the risk level are crucial as retirement approaches, to balance growth and protection against market downturns [2] - The article discusses the benefits of having a substantial retirement savings, specifically mentioning that with $1.6 million, one could withdraw $64,000 annually under the 4% rule, which aligns with expected living expenses [3] Investment Strategies - The article advises on the necessity of reviewing asset allocation to align with financial goals and timelines, especially as retirement nears [2] - It introduces the concept of required minimum distributions (RMDs) and suggests that Roth conversions can help manage these distributions and associated tax implications [6][7] - It also mentions the potential tax consequences of Roth conversions and the importance of timing these conversions based on income levels to avoid higher Medicare premiums [8] Diversification and Flexibility - The article encourages diversifying assets by considering taxable investment accounts, which are not subject to RMDs, as a viable strategy for retirement savings [9] - It suggests exploring various savings strategies beyond traditional investments, such as laddered CDs, annuities, and high-yield savings accounts for emergency funds [11] - The importance of understanding the retirement income plan is emphasized, including strategies for managing RMDs and tax implications through careful withdrawals from different accounts [12][13]

A one-time Roth conversion outperforms an equal-installments conversion or sticking with traditional IRAs and 401(k)s—regardless of the balance size and potential tax hit https://t.co/s7KGMp3YBN ...

A one-time Roth conversion outperforms an equal-installments conversion or sticking with traditional IRAs and 401(k)s—regardless of the balance size and potential tax hit https://t.co/JynKjuEZzh ...

A Roth conversion is the process of rolling over retirement funds invested in a pretax account, like a regular IRA or 401(k), into an after-tax Roth IRA. You’ll pay capital gains taxes at the time of rollover, but you won’t pay taxes in retirement when it’s time to withdraw from the Roth. Read Next: This ‘Boring’ Investment Could Be the Secret To Never Running Out of Retirement Income Check Out: 5 Clever Ways Retirees Are Earning Up To $1K Per Month From Home While a conversion can be the right thing for ...

A one-time Roth conversion outperforms an equal-installments conversion or sticking with traditional IRAs and 401(k)s—regardless of the balance size and potential tax hit https://t.co/uDRM4Vc8Bd ...

Core Insights - The article discusses the financial planning challenges faced by retirees, particularly in the context of account withdrawal strategies and tax implications [1][2][4]. Group 1: Retirement Financial Situation - Jim and Carla have a total retirement savings of $980,000, with additional emergency funds of $38,000 [1]. - Their monthly expenses are approximately $4,200, and Carla contributes $18,000 annually from her part-time job [1]. - Jim plans to delay Social Security benefits until age 67 to maximize his future payout [1]. Group 2: Withdrawal Strategy and Tax Implications - The article highlights the importance of the order in which retirement accounts are accessed, as withdrawing from the wrong account can lead to significant tax liabilities [2][4]. - Jim is concerned about required minimum distributions (RMDs) starting at age 73, which could push him into a higher tax bracket [2]. - The classic withdrawal order suggests using taxable accounts first, followed by tax-deferred accounts, and finally tax-free Roth accounts to maximize growth [4][6]. Group 3: Individual Retirement Contributions - Carla has limited retirement savings due to taking time off to raise children and only began contributing to a Roth IRA in her 50s [3]. - Jim's initial plan was based on his savings being sufficient for both him and Carla, highlighting the need for a comprehensive retirement strategy [3].

Nevertheless, “there’s nothing in the law that restricts how that deduction interacts with other planning strategies like Roth conversions,” Levy noted. So while it wasn’t specifically crafted to accelerate Roth conversions, Levy said using the tax break for that goal “is very much in line with normal tax planning, where we look at all deductions and credits to manage marginal tax brackets over time.”Lawmakers crafted the deduction to lighten the tax burden of seniors with fixed incomes and higher medical c ...

A one-time Roth conversion outperforms an equal-installments conversion or sticking with traditional IRAs and 401(k)s—regardless of the balance size and potential tax hit https://t.co/HRi6myWZnz ...