But, there are two key things yet for you to know.
First, while the upfront tax cost of a conversion may be in the thousands or tens of thousands, the long-term benefit may be hundreds of thousands of dollars (or more!) – – a good trade-off, don’t you think?
Second, there’s tax planning you can do to minimize the potential conversion tax, such as creating or using available deductions, and using your lowest tax brackets by converting a portion of your IRA each year.
Before doing a Roth conversion, you definitely need to weigh the short-term tax cost versus the long-term benefits. For many people, the benefits will outweigh the cost.
So Why Do It Now?
Because There’s a Silver Lining to the
Current Black Cloud Hanging Over the Stock Market!
While the market is down and your IRA is worth less, you can convert to a Roth at a much lower tax cost!
And, when the market later goes up, all the growth on the converted amount can accrue tax-free and be withdrawn later by you, your spouse and loved ones, tax-free!
You’ve heard the adage, “Buy low and sell high.” Well, convert now when your IRAs are low and benefit later when they’re high!
And the Recently Passed Stimulus Bill
May Make Doing It Now Even Better!
If you must by law take an RMD this year, the new “CARES” Act, just signed by the President, allows you to waive it.
This means only the conversion amount – – not both an RMD and the conversion amount – – will be subject to tax this year!
Here’s What You Should Do…RIGHT NOW!
Call our office at 1-800-756-5596 and let us know that you are interested in setting up a free appointment with one of our affiliated financial advisors at Pence Wealth Management. Your individual Roth conversion analysis – – how much makes sense to convert after weighing the current tax cost and future tax and financial benefits – – should be properly done by a Pence advisor or another qualified professional of your choice (there’s more to consider and calculate out than I’ve briefly discussed in this article!).
Regardless of the outcome of your Roth conversion analysis, one thing is for sure. If you wait until the stock market rebounds, you may have lost a golden opportunity!
