5 Good Reasons to Consider an IRA Conversion Before Year-End - by Morningstar Investment Research
Deciding whether it makes sense to convert a traditional IRA to a Roth IRA is a complicated business. It's hard to say what tax rates will be next year, let alone 10, 20, or more years from now. That, in turn, makes it difficult to know whether you're better off incurring taxes today--as you're required to do when you convert--or when you retire. And unless retirement is close at hand, it's also tough to forecast what your personal tax situation will be when you retire. Even if tax rates go up across the board by the time you retire, you may still find yourself in a lower tax bracket than you did when you were working. The planned expiration of the Bush tax cuts at the end of this year provides a very good reason to take a look at an IRA conversion sooner rather than later--ideally by Dec. 31 of this year. (Remember that you needn't convert your entire IRA at once--partial conversions are also allowed.) Morningstar director of personal finance Christine Benz highlights five key reasons to evaluate a conversion before year-end.
Don't Play Games With Your Withdrawals
On her recent visit to Morningstar, financial columnist Gail MarksJarvis addressed key considerations regarding in-retirement withdrawals and how retirees can avoid the trap of falling short on income. She noted the unfortunate position in which retirees often find themselves, when they think they have enough funds to live on through retirement but run out of money sooner than expected. She also talked about the importance of having a safe withdrawal rate and understanding what works for you. MarksJarvis also discussed why retirees should let their money 'heal' after a poor market cycle because it will most likely increase in value in the following years. Finally, she touched on why retirees should be careful of getting locked into long-term bonds in the current market environment. Click here to watch the entire video, transcript included:
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