Laura Saunders

speaker

5,937 appearances 109 recordings 1 series first heard Jul 2017 last heard Nov 2024

Laura Saunders’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Should You Convert Your IRA Retirement Savings to a Roth IRA? · 27 Jun 2022 podcast

Well, you're exactly right. voice-verified

Uncle Sam often has his hand out. voice-verified

And when you move from a traditional IRA to a Roth IRA, you have to pay full income tax on the transfer. voice-verified

And that can be a pretty stiff bill. voice-verified

And it's hard to think about accelerating those taxes and paying them before you absolutely have to. voice-verified

Well, in many cases, you could use the assets to pay the tax, but it's a really bad idea, the specialists say. voice-verified

In fact, they often say that if you're going to have to use assets from inside the IRA to pay the tax, that you probably shouldn't do a conversion at all because you're shrinking the amount of money in the Roth IRA. voice-verified

Well, timing is important because one of the biggest considerations in the decision to convert to a Roth IRA is based on the tax rate now versus what the tax rate would be when you withdrew the money. voice-verified

And so you always want to do conversions when the tax rate is lower when you do the conversion than it would be when you're taking the money out. voice-verified

And I could give you an example of this. voice-verified

So say that somebody is a young person who has a bunch of money saved from a workplace 401k plan or maybe an IRA, and they decide to stop working, go back to school and get a degree. voice-verified

Well, that will be a low income year. voice-verified

So that's a great time to convert to a Roth IRA. voice-verified

And it's also true for people who have retired. voice-verified

Maybe they have some low income years where they have a lot of flexibility and they haven't started to take Social Security and they haven't started to take required distributions from their IRAs. voice-verified

And so they could do some partial Roth conversions at that point. voice-verified

Maybe just enough to fill up the bucket of the tax rate. voice-verified

You never want to put yourself into a higher tax rate. voice-verified

Well, if you have a Roth IRA, that means there are fewer required minimum distributions taxable at higher rates coming out of your traditional IRA. voice-verified

And that can help people minimize their income for things like Medicare Part B and Part D premiums. voice-verified

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