top of page

Add a Title

Add a Title

Add a Title

Add a Title

Info

Read more...

Add a Title

Add paragraph text. Click “Edit Text” to customize this theme across your site. You can update and reuse text themes.

Read more...

Add a Title

Add paragraph text. Click “Edit Text” to customize this theme across your site. You can update and reuse text themes.

Read more...

Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

  • Writer's pictureJake Buckwalter

Roth Conversions and if they are a good option for you

As the calendar turns over, it is an excellent time to review your current tax situation and see if there are tax strategies that you can employ to lower your long-term tax liability. One of the go-to questions I frequently get from clients is, “Should I consider a Roth conversion?”. This question is great and can often lead to follow-up questions to see if a Roth conversion would make sense.

 

What is a Roth Conversion?

To elaborate on what a Roth conversion is, A Roth conversion occurs when an individual takes money in a pretax IRA, Traditional or Rollover, and converts that money to Roth dollars by transferring them to a Roth IRA.

 

This incurs a tax liability for the amount you convert, so if you transfer $10,000 from your traditional IRA to a Roth IRA, you would realize $10,000 in taxable income for the year. Unlike Roth contributions, there is no limit to the amount you can convert. So theoretically, if you wanted to and had a million dollars in your IRA, you could convert that entire balance to Roth.

 

When could this work for you

There are a couple of scenarios that I generally see as most optimal for Roth conversions and a couple of triggers associated with them.


  1. Age: the younger a person is, the more time the money has to compound; the growth is all tax-free in a Roth IRA. So, converting a dollar that has 50 years to grow tax-free can significantly impact your overall tax liability in the long term. Remember, pretax accounts grow tax-deferred, but you will ultimately pay taxes on the growth, which should be substantial given a longer timeframe. If you convert $10k and pay 12% federal income tax, or $1,200 today, and that money grows to $100k and you find yourself in the same tax bracket, you could potentially save yourself over $10k in taxes.

  2. Recently retired individuals or couples that have seen a significant drop in taxable income. This drop in income can open a window that allows them to target and fill up a certain tax bracket. The 12% bracket is often a good one to look at. The next bracket up is 22%, so there is a large jump after you get out of the 12% bracket.

 

When not to do this

There are also scenarios where doing Roth conversions does not make sense. The first would be a scenario where you do not already have significant pretax assets. If you do not have significant Traditional IRA assets, then there is generally no need to convert what you have to Roth. This is because if you use those pretax monies in retirement, you can usually spread your withdrawals out over several years and have minimal tax liability.

 

If you are close to retirement and are in a high tax bracket, then it also does not generally make sense to do Roth conversions. If retirement is right around the corner and you will see a decrease in taxable income, then it would generally benefit you to delay doing those conversions until you retire.

 

Lifetime span

The specifics of the amount and timing should always be thought of through the scope of a complete financial plan. Part of the planning process is determining tax strategies that allow clients to minimize their tax liability over their lifetime, not just in a specific calendar year. This is why it is essential to understand your spending needs in retirement as well as other sources of income such as social security and pensions.

 

If you wonder if Roth conversions would make sense for you, don’t hesitate to contact your financial advisor. At Whitaker-Myers Wealth Managers, we believe a financial plan is the answer to “am I going to be okay in retirement,” and we want to ensure we are looking at all aspects of your financial picture. We would be happy to meet with you and discuss your questions.

Recent Posts

See All

Comments


Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.