Are You Considering Roth IRA Conversions?

How should you be considering Roth IRA conversions as part of your retirement tax planning? The 2017 new tax law created generally lower income taxes for 2018 through 2025, presenting an enticing opportunity to convert traditional retirement savings to Roth accounts.

Once you retire, your taxable income is likely to decrease, and in the sweet spot between retirement age and age 70 1/2, you could have the opportunity to convert to Roth IRAs in 10 and 12 percent tax brackets. Even if you get into the 22 or 24 percent brackets, in 2026, those brackets are set to go up to 25, 28, or maybe even 33 percent, so it is almost like taxes are on sale right now.

However, on the other side, you could also end up triggering Medicare surcharges if your taxable income is over $170,000 for a joint filer or $85,000 for a single filer. It could also cost you the opportunity to harvest long-term capital gains at a zero percent tax rate.