Tuesday, November 10, 2009

Increase in Roth IRA Conversions

Posted By, Meredith Anderson

In retirement, your paycheck might go away, but taxes won't.
Still your tax bill can be hard to predict. To have some control over how much you pay the government each year, you should have both taxable and non-taxable accounts from which to draw your retirement income.
Imagine it this way. Perhaps early in retirement you choose to continue to work part time and supplement your income from retirement savings accounts. The combined income may put you into a higher tax bracket. However, if you take some money from a Roth IRA that year, because withdrawals are nontaxable, it could help keep you in the lower bracket.
In later years if you're not working and hitting the next highest tax bracket isn't an issue, you can pull more money from a traditional IRA or 401(k) account.
This type of tax diversification is one of the primary reasons people choose to put some of their money in a Roth IRA, or convert to such an account.

1 comment:

  1. It seems annoying that after you stop making money you still get taxed. Haven't you paid your debt to society? I mean I do understand that everyone needs to chip in and help keep the government going. -Kelsey Hoffman