Page 15 - Southern Exposure - January '25

Southern Exposure, Page 15

FinAnciAl Focus ®

When Is A Good Time For Roth Conversion?

By Sally Sima Stahl, Edward Jones

In life, you often get distributions, or RMDs — when you turn 73, or 75 if Edward Jones is a licensed insurance producer in all states
second chances—and the you were born in 1960 or later. But there’s no RMD and Washington, D.C., through Edward D. Jones & Co., L.P.,
same is true with investing. requirement with a Roth IRA — you can essentially leave and in California, New Mexico and Massachusetts through
To illustrate: You might not the money intact as long as you like. Edward Jones Insurance Agency of California, L.L.C.;
have been able to contribute Timing also comes into play with the financial markets. Edward Jones Insurance Agency of New Mexico, L.L.C.; and
to a Roth IRA during your When the market is going through a decline, and the value Edward Jones Insurance Agency of Massachusetts, L.L.C.
working years due to your of your traditional IRA drops, you could convert the Edward Jones, its employees and financial advisors cannot
income level, but you may same number of shares of the underlying investments and provide tax advice. You should consult your qualified tax
get that opportunity as you receive a lower tax bill or convert more shares of these advisor regarding your situation.
near retirement or even investments for what would have been the same tax bill. Contact us at (561) 748-7600, Sally Sima Stahl, CFP ,
®
when you are retired— • Tax-free legacy for your heirs—When your heirs AAMS , 1851 W. Indiantown Road, Ste. 106, Jupiter, FL
™
through a Roth conversion. inherit your Roth IRA, they can withdraw the contributions 33458.
And you can do so by converting your traditional without paying taxes or penalties, and if the account has
IRA to a Roth. While this sounds simple, there’s a major been open for at least five years, they can also withdraw
caveat: taxes. You’ll be taxed on the amount in pre-tax earnings tax-free.
dollars you contributed to a traditional IRA and then Finally, you could lower your tax bill in any given year
converted to a Roth IRA. (If you have both pre- and after- by stretching out your Roth IRA conversions over several
tax dollars in your traditional IRA, the taxable amount is years, rather than doing it all at once.
based on the percentage of pre-tax dollars.) But even if you were aware of these advantages, you
Why is a Roth IRA desirable for some people? Here might not have been able to invest in a Roth IRA for
are the key benefits: much of your life. For one thing, you might have earned
If you have large amounts in a traditional IRA, the too much money— a Roth IRA, unlike a traditional IRA,
tax bill on conversion can be significant. The key to has income limits. Also, a Roth IRA has only been around
potentially lowering this tax bill is timing. Generally since 1998, so, in the previous years, you were limited to
speaking, the lower your income in a given year, the more a traditional IRA.
favorable it is for you to convert to a Roth IRA. So, for You’ll want to consult with your tax advisor before
example, if you have already retired, but have not started embarking on this conversion—but if it’s appropriate for
collecting RMDs, your income may be down. your situation, you could find that owning a Roth IRA
• Tax-free withdrawals—you put in after-tax dollars to can benefit you and your family for years to come.
a Roth IRA, so you can withdraw your contributions at As you approach retirement, though, you might start
any time, free of taxes and penalties. And if you’ve had thinking of just how much you’d like to benefit from a
your account for at least five years and you’re at least Roth IRA.
591⁄2, you can also withdraw your earnings free of taxes. This article was written by Edward Jones for use by
• No RMDs—With a traditional IRA, you’ll have to your local Edward Jones Financial Advisor, Edward
start taking withdrawals — called required minimum Jones, Member SIPC.

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