A Bad Year Is A Great Year To Convert To A Roth IRA

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If your income is down or your retirement accounts are at a loss this year you may be overlooking a potential benefit hiding behind all that pain. It is a way for you to make lemonade out of lemons…

Consider converting your regular IRA’s, SEP-IRA’s, etc. into a Roth IRA this year. Here’s how it can benefit you… 

If your income is lower you may be under the $100,000 threshold required to allow you to make a Roth IRA conversion. The lower the better because converting to a Roth-IRA is a taxable event so the lower your tax bracket the less it costs you in taxes to make the conversion.

Additionally, if your retirement account assets are in the tank because of market declines that means the cost to convert is greatly reduced because you have fewer assets to be converted and taxed.

In short, what this means is you may be able to do some long-term retirement planning for the lowest tax cost in years. Hmmm, maybe there is some truth to the saying that adversity breeds opportunity.

Sure, it may be a pain to lose money in your retirement accounts and it is always a drag to watch your income decline, but these also happen to be ideal conditions for long-term tax planning and retirement planning by converting existing retirement accounts to Roth-IRA’s.

With that said, you should consult with your personal tax and financial advisor first before taking any action to fully understand all the rules and implications. Everyone’s individual situation is unique and requires personalized financial advice to make the correct decision.

I just wanted to plant the seed with this quick retirement planning strategy in case it applies to you or someone you know. Hope it helps.