I'm the Taxman
Most Baby Boomers will recognize the cutting lyrics to the Beatles song Taxman. "If you drive a car, I'll tax the street. If you try to sit, I'll tax your seat. If it gets too cold, I'll tax the heat. If you take a walk, I"ll tax your feet....Taxman!" Back when that song was written, not everyone worried about running out of money or how to implement an effective and tax-efficient distribution plan for their retirement assets because they didn't have to.
Life was simpler in many ways and retirement was really no different. People went to work, retired, and collected a pension and Social Security benefits. Both were guaranteed to last their lifetime.
Roth IRAs have the potential to grow tax free and your withdrawals are also tax free, once certain conditions are satisfied. We believe that now more than ever you may want to consider doing a Roth conversion while the stock market is down.
A lower stock market makes the Roth conversion strategy more appealing. This is because when your Traditional IRA account value decreases, you are able to convert the same number of shares at a lower cost. For example, let's say you have a Traditional IRA worth $1,000,000 and the value drops to $800,000. You can save on taxes by converting the lower value ($800,000) rather than the original higher value ($1,000,000). Please note this is just an example and you would not have to convert the entire amount of your Traditional IRA.*
It’s a smart thing to do with your money. If you are interested in performing a Roth conversion while the market is down, please let us know and send us your 2021 tax return as soon as possible. This is an opportunity to take control of your investments and be proactive with a move that could result in lower taxes on your IRA.
If you want to take advantage of this opportunity, we need two things from you.
1. Let us know that you are interested.
2. In order to run the Roth conversion analysis, we will need your 2021 tax return (If you haven't sent it to us already)
by Jeffrey Levine of Fully Vested Advice.