Hi, Vince Oldre, certified financial planner. I wanna talk to you about a hot topic around taxes, which is a Roth conversion. I know taxes are coming up here but a Roth conversion is actually much different than a Roth contribution. Now, with the Roth contribution, you have limits. You also have income limits when you wanna make a Roth contribution. But where a Roth conversion comes in is actually best when you’re over age 59 1/2 or if you’re closer near retirement.

The reason why is because your income has hopefully gone down and that means you can do some conversions, which means you’re taking money from an IRA, 401K, or 403B and you’re moving that to a Roth IRA. Once it’s in a Roth IRA, it’s gonna grow tax-free. When you take it out, it’s tax-free. Now, there are limitations as far as how long you have to let it sit in a Roth before you can take the gains tax-free. But for the most part, it’s gonna grow tax-free when you take it out tax-free, which is a great benefit, whereas your 403B, IRA, 401K is only growing tax-preferred.

Now, when you move it from an IRA or 401K, you’re going to have to pay the taxes when you make that conversion for that tax year. When you’re looking at your taxes for 2017, keep in mind it’s too late to do a Roth conversion. But it’s a great time to talk to your CPA or your tax advisor about doing a Roth conversion for the future, for the year 2018 or five years, 10 years, out. The reason why it’s better to plan around this now is that you can reduce your overall taxes in the future if you take income from your Roth. It won’t count against you for an income to increase how much your social security might be taxable.

There are so many different things that can help you by doing a Roth conversion. The only issue is that you have to stomach the taxes at that time of when you make that conversion. Make sure you speak with a financial advisor or a tax advisor before you move any money to a Roth IRA. Make sure you are taking this video and just taking the information, but making sure that you are speaking to your tax advisor or CPA before you make that conversion. It’s very important that you do that so that you do not make any mistakes.

As always, if you have any other questions, please reach out to us and we look forward to speaking with you next time.

Roth Conversion And How It Works
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