NerdWallet: How a Roth ladder can improve your retirement savings

by | Nov 15, 2022 | Stock Market

This article is reprinted by permission from NerdWallet. The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. The Roth IRA can be an attractive retirement account to all types of investors. One reason is that Roth IRAs can help you save money on taxes, especially if you anticipate being in a higher tax bracket in the future.

A strategy called a Roth conversion ladder can help with more tax savings on money you may have stashed away in other retirement accounts.What is a Roth conversion ladder? First, let’s start with the Roth IRA. A Roth IRA is a retirement account that allows investors to enjoy tax-free growth and make tax-free withdrawals in retirement. That’s because you pay taxes on your money before depositing it into the Roth. You can also withdraw your contributions at any time, tax and penalty free. Roth IRAs have income limits as well as annual contribution limits — $6,500 in 2023 (or $7,500 if you’re age 50 or older). But there’s no limit on the amount of money you can convert to a Roth IRA, and there are no income limits on conversions, either. See: Thinking about a Roth conversion? If you have an IRA, consider this ‘bear market bonus’ A Roth conversion ladder is when you take money from tax-deferred retirement accounts and move it into a Roth IRA gradually. With inflation at a 40-year high, now might be a good time to consider using this ladder to climb your way to tax-free withdrawals in the future.How do Roth conversion ladders work? “You’re basically taking a portion … a little bit every year, until such tim …

Article Attribution | Read More at Article Source

Share This