Certain people should convert their traditional IRAs to Roth IRAs. This move is sensible for individuals in higher tax brackets who plan to withdraw money, as such cash removals are tax-free. Retirement plan conversions ought to happen with tax savings front of mind. Estate planners like the skilled professionals at Ruggiero Law Offices are familiar with strategies that lower the related penalties. Here are a few key points to consider.
Maximizing Tax Brackets
The greater your income, the more you must pay the government. Thus, staying in a lower tax bracket is always desirable. You can do this by contributing strategic amounts. For example, single individuals earning $145,000 a year are in the 24% bracket. They don't reach the next higher category until they make at least $164,925. Such individuals may convert $19,925 of income to a Roth IRA and continue paying Uncle Sam at the same rate.
Making Several Conversions
There's no need to convert all your money at once and face a massive hit. It often makes sense to exchange a large sum of money by transferring smaller chunks over the years. This method can lower the fiscal shock.
Observing Changes in the Law
Tax laws are constantly in flux. There could be forthcoming adjustments that increase the cost of converting traditional IRAs. Jumping into action before modifications take effect might net significant savings. For this reason and others, certified public accountants are great resources who can help you make the right decisions.
If you wish to convert a traditional IRA to a Roth IRA, do it in the most tax-efficient manner possible. Become familiar with the various tactics that may reduce existing fiscal drawbacks. Since 1990, Ruggiero Law Offices has helped families like yours protect what matters most. Led by James "Jim" Ruggiero and supported by a skilled team of attorneys and legal professionals, our firm brings practical, common-sense solutions to estate planning. By considering sophisticated tax planning strategies, we deliver tailored solutions based on our decades of experience.