If you expect the tax rates you pay to rise, you may be able to proactively avoid higher taxes on retirement funds by converting a traditional IRA to a Roth account. This may be a smart tax move but be aware that there’s a current cost. That is, a conversion is treated as a taxable liquidation of your traditional IRA, so the amount you convert will be taxed at current tax rates. The good news is, after the completed conversion, all qualified withdrawals are free from federal tax. To be qualified, withdrawals must be taken after the Roth account has been open for more than five years, and after you reach age 59½ or become disabled or die. Contact us with questions.
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