It’s the most wonderful time of the year for holiday cheer – and last-minute tax tips. Retirement Tip of the Week: As we approach the new year, look for tax-advantageous strategies to cut your tax bill next year, or at least save you money in the long run.
Tax planning can be arduous, but so is getting everything situated in the weeks leading up to Tax Day. There are also a few important deadlines retirees need to keep in mind to save money or avoid big penalties. One of the most popular strategies is the Roth conversion. Traditional retirement accounts, such as the traditional IRA or 401(k), are invested with pretax money, which means savers are taxed at the time of withdrawal. Roth accounts are contributed with after-tax dollars, so anyone who follows the rules will reap the benefits of tax-free distributions later in life. There’s no right answer for which account is best, but general guidelines suggest people in lower tax brackets contribute to a Roth, especially if they expect to be in a higher tax bracket at retirement, and those who are in their peak earning years should go with a traditional, if they expect their inco …