Maintaining my Cool and thinking about Conversions

Nandita Das Investment and Tax Planning

It is the time of the year when you relax and look back on what you have accomplished over the years. While you have your eyes on the rear view mirror, do not lose track of the front view in the road lies ahead. With the stock market being topsy-turvy, it is human instinct to pull back but do not lose sight of your long-term goal.

If you are wondering whether you should put money in traditional IRA or Roth IRA (there are eligibility requirements) below are the reasons why you should be thinking of ROTH.

  • You can withdraw your contributions at any time and any potential earnings can be withdrawn tax-free (provided the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, disability, qualified first-time home purchase, or death.)in retirement.
  • No required minimum distribution unlike traditional IRA.
  • Contributing to a Roth IRA gives you tax flexibility in retirement.

If you do not meet the eligibility for Roth Contribution, may be Roth Conversion may work for you. There are no eligibility requirements but talk to the professional before you convert your Rollover IRA to Roth as the goal here is tax planning. You only want to do conversion in the amount that will not make you creep into the higher tax bracket.