All At One Financial

Roth IRA Conversions─Do They Make Sense?

senior couple holding notebook with roth ira and traditional ira words

Roth IRA Conversions─Do They Make Sense? Home Blog Roth IRA Conversions─Do They Make Sense? Roth IRA Conversions─Do They Make Sense? The Answer Will Shock You! If you would like to know if a Roth IRA conversion makes sense for your individual situation, please click here to email us or phone 812-774-5829 and set up a time to come in and have your numbers calculated. We have proprietary conversion software so we can tell you in a matter of minutes if converting will make sense. To sign up for a free consultation or to just get more information click here. It’s simply when you convert a traditional tax-deferred IRA to a Roth IRA where, once converted, the money is allowed to grow tax-free and come out tax-free. Income taxes are due on ALL of the money in the IRA at the time of conversion. If you convert before age 59.5, the normal 10% penalty for early withdrawal is waived so long as you wait 5 years before taking money out of the new Roth IRA and are over 59.5 when taking withdrawals. Should you convert your traditional IRA to a Roth IRA? The answer depends. On what? More variables than you can shake a stick at (which is why we use proprietary software to calculate the number). As a general statement that, if you are in the same or lower tax bracket when in retirement, converting to a Roth IRA is NOT going to make economic sense. Examples The best way to get the point across is with examples. For the examples, we will convert a $500,000 IRA. We used a 1.2% average mutual fund expense on the money in the IRA and a 7% annual rate of return. We will have the clients take income at age 70 for 15 years. We assumed the clients file taxes as married filing jointly and live in a state with NO income tax. 1) Paying income taxes from the IRA—This example is for someone who does not have “other money” to pay the income taxes due when converting the traditional IRA to a Roth IRA. The above charts make it clear that, if you are planning to use the money from your IRA to pay the income taxes for the conversion, it’s going to make little sense to convert. We assumed the example client would be in the same income tax bracket in retirement. 2) Paying taxes due on conversion from “other” non-IRA sources—the following examples assume that there are sufficient “other funds” (cash in the first example) that can be used to pay the income taxes upon conversion (so all of the money upon conversion can stay in the new Roth IRA to grow and come out tax-free). The following is if the client had to sell stock with a $50,000 basis to pay the tax and where the mix of long-term and short-term capital gains taxes upon the sale is 50%. Summary The theory of a converting a traditional IRA to a Roth sounds great when you think about it really quickly (pay taxes now so money can grow for years tax-free and come out tax-free in retirement). However, when you factor in ALL the needed variables, you will find that unless you plan on being in a higher (or much higher) income tax bracket in retirement, converting your traditional IRA to a Roth IRA will make little economic sense.   If you would like to know if a Roth IRA conversion makes sense for your individual situation, please click here to email us or phone 812-774-5829. To sign up for a free consultation or to just get more information click here. Related Post Roth IRA Conversions─Do They Make Sense? Roth IRA Conversions─Do They Make Sense? Home Blog Roth IRA… Read More Jonathan MorenoOctober 5, 2024 Medicare Planning: The Key to Your Financial Health in the U.S. Medicare Planning: The Key to Your Financial Health in the… Read More Jonathan MorenoOctober 1, 2024

Medicare Planning: The Key to Your Financial Health in the U.S.

Medicaid

Medicare Planning: The Key to Your Financial Health in the U.S. Home Blog Medicare Planning: The Key to Your Financial Health in the U.S. Medicare Planning: The Key to Your Financial Health in the U.S. Financial health planning is crucial for ensuring long-term security, especially when it comes to healthcare. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo. Lorem ipsum dolor sit amFinancial health planning is crucial for ensuring long-term security, especially when it comes to healthcare. In the U.S., Medicare is a vital part of financial planning for those nearing retirement or dealing with health conditions. This article explores how Medicare planning plays a pivotal role in securing financial stability, with an emphasis on understanding the complexities of Medicare and how to effectively integrate it into your overall financial plan.et, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo. What is Medicare Planning? Medicare planning is the process of preparing for healthcare costs as you approach retirement age (65+). Since medical expenses can be unpredictable, aligning your finances with your expected healthcare needs ensures you’re financially protected. Medicare planning involves understanding the different parts of Medicare (Part A, B, C, and D), selecting supplemental coverage if needed, and planning for out-of-pocket costs. Why is Medicare Planning Essential for Financial Health?  Healthcare costs in the U.S. are a major concern, especially in retirement. Without a proper Medicare plan, many retirees face unexpected medical expenses that can deplete savings. According to the AARP, medical expenses for retirees can reach hundreds of thousands of dollars over time. Medicare planning ensures that these expenses are anticipated and prepared for, preventing financial stress during retirement. Strategies for Effective Medicare Planning Assess Your Health Needs: Start by evaluating your current health and the potential future healthcare services you might need. Understand Enrollment Periods: Missing important enrollment windows can lead to higher premiums or a delay in coverage. Plan for Out-of-Pocket Costs: Even with Medicare, some expenses are not covered, so it’s essential to have a financial cushion for things like dental care or long-term care, which are not typically covered by Medicare.   Strategies for Effective Medicare Planning  Incorporating Medicare planning into your financial strategy is not just a healthcare decision—it’s a financial one. Properly planned, it helps protect your savings and ensures your retirement years are financially secure. For more resources on Medicare planning, visit the official Medicare website at www.medicare.gov. Related Post Negligence Lawsuits Negligence Lawsuits Home Blog How Financial Health and Medicare Planning… Read More Jonathan MorenoOctober 5, 2024 Is a Lawsuit Lying in Wait for You? Is a Lawsuit Lying in Wait for You? Home Blog… Read More Jonathan MorenoOctober 5, 2024 Predicting The Future Predicting The Future Home Blog Predicting The Future Predicting The… Read More Jonathan MorenoOctober 5, 2024 Load More