July 8, 2022
Selecting the right retirement account for you is key to securing a healthy financial future. If you currently fund a traditional IRA, you should consider converting to a Roth IRA.
First, a Roth IRA allows you to accumulate tax-free wealth for your retirement. Traditional IRAs offer tax-deferred growth, which means you'll have to pay taxes when you're ready to withdraw from your account. But with a Roth IRA, you only contribute after-tax dollars, which means you won't have to pay any taxes upon withdrawal. Under the right circumstances, you can also use your Roth IRA to give your heirs tax-free income in the future.
Why are some people considering converting their traditional IRA to a Roth IRA? For one, it's expected that income tax rates will rise in the coming years, so paying taxes now upon contribution and then letting your money grow tax-free in a Roth IRA could be advantageous. Many also expect to see new restrictions on Roth conversions and asset accumulations in the next few years.
Depending on your situation and tax strategy, now could be a good time to see if an IRA conversion is right for you. Remember that you can convert all or just part of your traditional IRA to a Roth IRA by paying a one-time tax on the conversion.
Converting a traditional IRA to a Roth IRA can be beneficial for many different profiles. If you identify as one of the following, now might be the time for you to consider making the conversion:
If you have questions about converting your traditional IRA to a Roth IRA, or general questions about your retirement strategy, please contact your Perlson LLP professional at (516) 541-0022.
New York State has launched a program that aims at helping you secure the funding you need.