Does it make sense to convert my 401k & IRA to a Roth IRA while still working?
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- เผยแพร่เมื่อ 5 ก.ค. 2024
- If you’ve been saving the majority of your money into a 401k or an IRA while you’ve been working, you’ll soon have the realization that none of that money has been taxed yet. That’s why we frequently get asked whether it’s a good idea to use a Roth conversion while still working to move some or all of that money into a Roth IRA.
The decisions you make today could potentially save or cost you hundreds or thousands of dollars in retirement and a Roth conversion is one of those strategies that could have a significant impact. Helping people determine if it makes sense to convert their 401k to a Roth IRA while still working is a common exercise we go through with our clients. So, we’ll take you inside some of those conversations to help you understand how to come to that decision for yourself if you should convert to Roth IRA.
Plus, Scott will share an example that might often surprise people, but it will illustrate the importance of tax planning now.
#rothconversion #retirementplanning #taxplanning
Here's what we cover in this financial video:
0:00 - Intro
1:32 - Introducing our hypothetical couple
2:40 - What is your taxable income today vs future?
5:28 - Factor 1: You think tax rates are going to stay the same
6:32 - Factor 2: Will tax rates go up or down?
10:04 - Factor 3: Will Congress let current tax rates expire after 2025?
13:57 - Factor 4: The Widow’s Tax
FREE Guide to Unlocking Hidden Tax Opportunities: lifemoneyshow.com/taxes
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I am currently contributing to a Roth 401K and I am doing an ( IPRR ) In plan Roth Rollover every year. Because currently I am in the 19% tax bracket. That 19% is for the state and federal combined.
Taxable income is the AGI amount?
Sorry I still not clear- so let say I have 400 in 401k-how much if not all can be converted to Roth IRA? And how about future contribution-is that going into the new roth? Regardless tax bracket, if the balance keeps growing with each year and the us you may pay more tax later on?
What about tax free growth over a period of time?
I have file as a single person even If my wife dies on 30 Dec?
Can we convert partial traditional IRA to Roth IRA and leave some as traditional IRA?
Yes. You can do partial conversions of any amount as many times as you want to spread out the tax burden.
So this convention moves all untaxed money into a tax-free bucket and we pay those taxes during that tax year correct?
During the quarter a conversion was done or face a penalty.
Can we roll traditional 401K to Roth 401K?
It’s company based. Some companies allow to convert directly from Traditional 401K to Roth 401K but some companies don’t allow to do it. It is easier to call company to verify it. It happened to me as my company doesn’t allow but my husband company can do it.
This is totally wrong. Majority of people are much better with pretax accounts because when you convert them to Roth, you pay marginal tax rates (in this example, 22%) whereas, after retirement, you only look at effective tax rates, which will be only 12%. Even when tax rates go up, still your effective tax rates will be only 15%.
And even when your spouse dies first, still your effective tax rates won’t be higher (SS income cut by a half).
Watch other videos (like the one below ) to find why most of people are better off with pretax accounts. Even $3 millions in your pretax accounts are still not taxed more. Don’t convert them. You will regret badly after retirement.
th-cam.com/video/MHLzMXOg7Pk/w-d-xo.htmlsi=6RqsftXdwytmX2Ls
I could see tax rates going down with a Republican like Trump.