Market volatility can distract from long-term retirement planning, making it all the more important to maintain both short- and long-term strategies for saving and investing. One strategy to explore is converting a traditional IRA to a Roth IRA. If you’re thinking of making the switch, here are some key factors to consider:
Current vs. future taxes: The income from converted funds will be taxed in the current year, potentially pushing you into a higher bracket. This may make sense if you expect to be in a higher tax bracket during retirement or believe federal tax rates will rise. The benefit of tax-free growth, later withdrawals and no required minimum distributions (RMDs) during your lifetime may offset the taxes paid today. Roth IRAs may also provide tax advantages for heirs.
Timing: Converting to a Roth often makes the most sense during lower-income years, in years when market values are down (allowing you to convert more shares for the same tax cost), or before RMDs begin at age 73. Conversions can be made regardless of income level.
Permanent decision: A Roth conversion is permanent; you cannot “recharacterize” the transfer back to a traditional IRA.
The 5-year rule: This rule generally prevents penalty-free withdrawals of converted earnings (and principal for those under age 59½) for five years, starting Jan. 1 of the conversion year. Consider whether you might need access to this money sooner.
As you plan for retirement, our financial professionals can help you navigate your overall portfolio. Visit kofc.org/familyfinance for more resources.
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MICHAEL FINNERAN is vice president of field management at the Knights of Columbus and a member of St. Pius X Council 16347 in Fairfield, Conn.
*K of C professionals do not provide tax advice.








