From ATX Portfolio Advisors:
Picture this: You're at the pearly gates of financial heaven, but instead of Saint Peter holding a ledger, you've got Uncle Sam with a calculator in his hand. Before you get in, he's going to add up everything you owe. For those of you that have done a decent job of saving in your retirement accounts, the cost of entry may be a mighty cross to bear. But what if I told you there's a way to baptize now and avoid that hefty tax bill later? That's right, folksI'm talking about the holy sacrament of Roth conversion.
With the IRS recently handing down its commandments on required minimum distributions (RMDs) for inherited IRAs, and the expiration of the 2017 Tax Cuts and Jobs Act at the end of 2025, it's time for those with substantial tax-deferred accounts to consider a financial conversion of biblical proportions.
Why Should You Convert?
Think of the current marginal tax rates as manna from heavendelicious, limited, and probably not coming back anytime soon unless Republicans sweep the House, Senate, and White House this November. The 2017 Tax Cuts and Jobs Act lowered most tax brackets by 1% to 4%, a blessing for anyone looking to minimize their tax burden. But like all good things, these rates came with an end date in 2025. Come 2026, they'll likely go back to their old, harsher waysthink fire and brimstone for your wallet. That's why now is the time to convert your traditional IRA into a Roth IRA and lock in those heavenly tax savings.
For an illustration of the power of converting retirement account assets, let's look at an actual couple, both 58, that have about $6.5 million in IRAs between a husband and wife. In the first illustration (Exhibit 1), the couple optimizes their taxes by converting a portion of their IRAs up the upper threshold of the 24% tax bracket ($383,900 of taxable income in 2024 for Married Filing Jointly) at the end of each year, a process they repeat annually until they reach the age of 73, when RMDs kick in. I assumed that current tax rates remain intact and inflate by an average of 2.5% over the rest of their lifetimes. In this illustration, paying more taxes now could potentially save $1,594,819 in taxes, particularly in later life when RMDs are higher and the first spouse has passed away.
To see the illustrations and the rest of the article, click HERE.
If you would like to learn more about ATX Portfolio Advisors, let's Get Acquainted.
Principal
jeff.weeks@atxadvisors.com
(512) 537-5955
www.atxadvisors.com
Click HERE to schedule an appointment or call.
Picture this: You're at the pearly gates of financial heaven, but instead of Saint Peter holding a ledger, you've got Uncle Sam with a calculator in his hand. Before you get in, he's going to add up everything you owe. For those of you that have done a decent job of saving in your retirement accounts, the cost of entry may be a mighty cross to bear. But what if I told you there's a way to baptize now and avoid that hefty tax bill later? That's right, folksI'm talking about the holy sacrament of Roth conversion.
With the IRS recently handing down its commandments on required minimum distributions (RMDs) for inherited IRAs, and the expiration of the 2017 Tax Cuts and Jobs Act at the end of 2025, it's time for those with substantial tax-deferred accounts to consider a financial conversion of biblical proportions.
Why Should You Convert?
Think of the current marginal tax rates as manna from heavendelicious, limited, and probably not coming back anytime soon unless Republicans sweep the House, Senate, and White House this November. The 2017 Tax Cuts and Jobs Act lowered most tax brackets by 1% to 4%, a blessing for anyone looking to minimize their tax burden. But like all good things, these rates came with an end date in 2025. Come 2026, they'll likely go back to their old, harsher waysthink fire and brimstone for your wallet. That's why now is the time to convert your traditional IRA into a Roth IRA and lock in those heavenly tax savings.
For an illustration of the power of converting retirement account assets, let's look at an actual couple, both 58, that have about $6.5 million in IRAs between a husband and wife. In the first illustration (Exhibit 1), the couple optimizes their taxes by converting a portion of their IRAs up the upper threshold of the 24% tax bracket ($383,900 of taxable income in 2024 for Married Filing Jointly) at the end of each year, a process they repeat annually until they reach the age of 73, when RMDs kick in. I assumed that current tax rates remain intact and inflate by an average of 2.5% over the rest of their lifetimes. In this illustration, paying more taxes now could potentially save $1,594,819 in taxes, particularly in later life when RMDs are higher and the first spouse has passed away.
To see the illustrations and the rest of the article, click HERE.
If you would like to learn more about ATX Portfolio Advisors, let's Get Acquainted.
Principal
jeff.weeks@atxadvisors.com
(512) 537-5955
www.atxadvisors.com
Click HERE to schedule an appointment or call.