Ask The Hammer: Is it Worth Doing a Roth IRA Conversion Before the Tax Laws Change?
Should you move money from your IRA's and 403B's to Roth IRAs to get ahead of the coming tax rate changes? Jeffrey Levine, aka The Hammer, discusses IRA 's and Conversions.
Key Takeaways
- Avoid paying conversion taxes from your own retirement accounts if possible—withdrawing from a traditional IRA adds more taxable income that year, reducing conversion efficiency, while withdrawing from a Roth afterward reduces tax-free growth
- Roth conversions can still be worthwhile if you're in a genuinely low tax year now and expect higher rates later (due to Social Security, RMDs, or 2025 Tax Cuts and Jobs Act expiration), even if you must fund the taxes from your IRA
- Explore alternative funding sources before tapping your IRA: home equity lines of credit, reverse mortgages, life insurance cash value, or even low-interest family loans can preserve more retirement assets for growth
- If RMDs are 1-2 years away, borrowing at a low rate to fund conversions now—then repaying with future RMD income—lets you convert more without pushing yourself into a higher tax bracket this year
- For family situations where adult children have high income tax brackets, loaning parents money for Roth conversions at their low rates creates a 'win-win-win' since inherited assets will already be tax-free
Ask The Hammer: Is it Worth Doing a Roth IRA Conversion Before the Tax Laws Change? Should you move money from your IRA's and 403B's to Roth IRAs to get ahead of the coming tax rate changes? In this episode of Ask The Hammer, Jeffrey Levine, aka The Hammer, discusses IRA 's and Conversions. Watch more episodes of Ask The Hammer at this link: https://www.finstream.tv/videos/ask-the-hammer/
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