Roth vs. Traditional IRA: When a Roth Conversion Makes Sense
Ryan Kittredge, ClearPath Financial Partners, discusses the key differences between traditional IRAs and Roth IRAs, and when it may be beneficial to consider a Roth conversion. Roth conversions involve moving funds from a traditional IRA or 401(k) to a Roth IRA, which requires paying taxes on the converted amount upfront. Many investors balk when they hear that but as Ryan explains depending on your financial situation and age there are times when it can be beneficial. The optimal timing for Roth conversions is often in the years between retirement and the start of Social Security and pension income, when taxable income may be lower. Roth conversions can be a useful strategy to hedge against future tax increases and diversify tax exposure in retirement, but require careful planning to manage tax brackets.