Roth Benefits

Why converting retirement to a Roth IRA could be a smart move

As you save for retirement, you’ll likely have a few different accounts. Perhaps there’s a 401(k), a brokerage account, a traditional IRA and more. However, when it’s time to enter your golden years, you might want to consider converting all of those savings into a Roth IRA. Here are some reasons why.

No required distributions

Required minimum distributions (RMDs) can be a tough thing to navigate in retirement. As USA Today notes, when you turn 72, you must make RMDs from your retirement accounts. If those accounts are quite large, you could end up being forced to withdraw more than you need. A Roth IRA doesn’t have RMDs. If you can convert your other accounts into a Roth before you hit 72, you won’t have to deal with the headache of tax planning and you’ll control how much you withdraw.

Social Security Benefit

Another advantage provided by changing your savings to a Roth IRA is it won’t impact how much Social Security benefits are taxed. The taxes on those benefits are based on your combined income, and Roth IRA distributions don’t count toward that. So if you convert to a Roth IRA before you take Social Security, you’ll pay a lower tax rate on the benefits.

Tax Control

Converting your savings to a Roth IRA is all about controlling your tax rate. The easiest time to do that is in your early retirement years. You might find every penny counts during retirement, and paying lower taxes is one way to make the most out of your nest egg.

Chris O'Shea

Chris O'Shea