Considering a Roth IRA conversion after 60? Here’s a primer on the potential benefits, as well as the drawbacks.
Have you considered converting a pre-tax retirement account into a Roth account as you approach retirement?
Converting pre-tax retirement accounts such as IRAs to after-tax Roth IRAs could allow you to keep growing funds tax-free and then make withdrawals in retirement without paying taxes.
Is this the right retirement savings strategy for you? To find out, it could be a good idea to speak with a Federal Retirement Consultant.
Research suggests people who work with a retirement consultant feel more at ease about their finances and could end up with about 15% more money to spend in retirement.
A 2022 Northwestern Mutual study found that 62% of U.S. adults admit their financial planning needs improvement. However, only 35% of Americans work with any advisor or consultant
Roth IRA Conversion Basics
The difference between a Roth IRA and other types of IRAs is that the Roth account is funded with after-tax dollars. That means you pay taxes on funds before contributing them to the Roth, and you can’t deduct contributions from your taxable income.
However, the money in the Roth account grows tax-free and you can withdraw funds after you retire without paying taxes.
You can convert funds in pre-tax IRA accounts to a Roth IRA. This includes traditional IRAs, SEP IRAs and Simple IRAs and of course your Thrift
When you convert pre-tax money in a regular IRA to a Roth IRA, you have to pay taxes on it at your current rate. The conversion amount is treated as regular income, which can bump you into a higher tax bracket and cause a high tax bill for the conversion year.
