I have most of my money in a traditional IRA. I am 66 years old and still working. Is it better to convert to a Roth IRA and invest? Am I able to transfer the stocks in the traditional IRA, or do I have to sell them?
Hello,
Before you do anything, you really need to sit down with a planer to review your whole financial situation. Generally speaking, we, the financial planners, like to recommend using the Roth conversation for retirees to reduce their tax burden before the RMD time and in coordination with Social Security claiming and Medicare filing. However, the conversion strategy may not work for everyone. For example, if you are already in a low tax bracket and have the needs to withdraw IRA periodically, there’s no reason to convert Roth by paying tax upfront and without giving it much chance to grow to get your paid tax back. Thus, Roth conversion really depends on the individual’s situation.
Furthermore, once the decision is made that Roth conversion works for you, you and your planner need to decide how long it will take you to do the full or partial conversion so you don’t pay extra tax.
Lastly, you don’t have to sell investments in the T-IRA to do the conversion, but make sure to check with your financial institution first. Best!
You're wise to consider Roth IRA conversion strategies. Of course, with the limited information provided, I can only respond in general terms. Assuming you have cash outside of the IRA to pay the taxes, it may make sense to explore conversions. The biggest questions are: when will you retire and what should your post-work income total? If you will be in a lower tax bracket in retirement, hold off on the Roth conversions. Or, if you expect you'll use the Roth money soon, converting doesn't make a lot of sense as you'll have limited time to enjoy tax-free compounding.
On the other hand, if you expect to leave this account alone for many years (which is still possible with today's life expectancy figures), a Roth conversion can be a great option. But again, I'd have to know more of your pre- and post-retirement taxable income situation to comment further.
You can convert assets "in-kind", so you don't have to sell assets you'd like to keep. See here where it says, "You can convert your eligible retirement assets directly into a Roth IRA without going to cash investments first." "Contributions" to a Roth do have to be in cash.
I would welcome the chance to help further, if you'd like. Please contact me if I can be of additional assistance.
Regards,
John Madison
Q. Is it better to convert to a Roth IRA and invest?
A. At 66 years old I find it hard to encourage someone to convert to a Roth. You're right at the point where you are going to start taking the money for income, and taxes in retirement are different than taxes while working. Also, certain taxes are different in each state. There are a lot of factors to consider.
Q. Am I able to transfer the stocks in the traditional IRA, or do I have to sell them?
A. you would have to sell them.
The good news is with the tools and planning software available, you dont have to guess on this one. I would be happy to schedule a no-cost, no-obligation consultation wih you and help you best understand what to do. To instantly book a time you can visit: https://calendly.com/jcjones/investopedia
Hope to hear from you.
-Jordan Jones, RFC