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“Here’s why a Roth individual retirement account conversion may pay off in a down market”

Article from cnbc.com

Soaring inflation, interest rate hikes and the war in Ukraine have sparked ongoing stock market volatility. But there may be a bright spot: the chance to save money on a Roth conversion. The strategy allows higher earners to sidestep the earnings limits for Roth individual retirement account contributions, capped at $144,000 modified adjusted gross income for single investors and $214,000 for married couples filing together in 2022.

Here’s how it works: Investors make what’s known as non-deductible contributions to a pre-tax IRA before converting the funds to a Roth IRA, kickstarting tax-free growth. The trade-off is that Roth conversions trigger an upfront tax bill on contributions and earnings. The bigger your pre-tax balance, the more you’ll owe for the conversion. And the latest stock volatility may be an opportunity for investors eyeing a Roth conversion, said certified financial planner Ashton Lawrence, partner at Goldfinch Wealth Management in Greenville, South Carolina.

“It’s almost like getting that Roth IRA on sale,” he said. (Click here to continue reading this cnbc.com article.)

Have questions about how Roth conversion might fit into your plan? Contact our investment team. (Click here for contact info.) Or learn more about our financial planning and investment services. (Click here to learn more.)

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Blog by Greg Storen, MBA – Advisory Services Director, Senior Tax Accountant

Learn more about Greg and the rest of the Storen Financial team here.