Considering A Roth IRA Conversion? Here’s What Investors Need To Know To Reduce The Tax Bite

If you’re considering a Roth IRA conversion, your timing and yearly planning can significantly reduce the tax bite, financial experts say. The popular retirement savings strategy allows higher earners to skirt the income limits for Roth IRA individual retirement account contributions. While the maneuver may kickstart tax-free growth, you’ll owe levies on pretax deposits.

And boosting your adjusted gross income may have other consequences, according to certified financial planner Ashton Lawrence at Goldfinch Wealth Management in Greenville, South Carolina.

For example, you may lose eligibility for certain write-offs, such as the child tax credit or student loan interest deduction. And retirees may unknowingly trigger higher Medicare premiums, he said.

Medicare Part B and Part D calculate monthly premiums with your modified adjusted gross income from two years prior, which means your 2022 income can cause higher costs in 2024.

“That’s a big one that slides under the radar,” Lawrence said.

However, there may be opportunities to help offset the upfront taxes and avoid some of these issues.

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Source: CNBC