Creating Flexible Income in Retirement: Roth Conversions

Feb 07

If you saved for retirement in a tax-deferred account, you lowered your taxes in the years you contributed pre-tax dollars. When you get into retirement and start to withdraw those funds, the taxes will be due. And once you reach age 73, you’ll be subject to required minimum distributions (RMDs) to ensure that you take ever-increasing amounts out of these accounts so the taxman can get his share.

This lack of control over your income stream in retirement can put you at risk of having to pay taxes on up to 85% of social security, and it may mean you will be subject to the Medicare part B and part D premium surcharge (IRMAA).

What to do? Roth accounts have income limits for contributions while working, but you can roll over an existing tax-deferred 401(k) or IRA into a Roth without limits. Once you pay the taxes, your investment in the Roth... ...