Sometimes a planned tax-free Roth Conversion can end up being quite taxable. It all depends on timing of other actions.
investing
IRA Investment Planning for Taxation
The question often comes up – what types of investments are best for my IRA? Of course, any investment that you make in a tax-deferred fashion is a good one, at least in theory. But there are some investments that make the most sense for your IRA versus other vehicles… and some investments that make more sense in other kinds of investment accounts, where possible. Listed below are a couple of considerations to take into account when considering taxation of your IRA and non-IRA investments. Bonds and other interest-bearing vehicles Given the nature of the IRA – deferring taxation on current income and growth, investments that would otherwise be taxed at ordinary income tax rates would be best for your IRA. This includes the likes of interest-bearing investments, such as CDs or bonds. Since, presumably, your tax rate when you begin taking distributions will be either the same or less […]
Avoid the Overweight Retirement Plan
While it’s generally a good idea to defer as much income as possible into your available IRAs, 401(k)s and Roth accounts, as with everything else in life, too much of a good thing can be a problem as well. When you have the bulk of your financial assets in retirement plans, you might accidentally expose yourself to some risks that you haven’t thought about… since retirement plan assets are much more likely to be impacted by changes to legislation – as we have seen in the past. In these days when Congress is looking for money just about everywhere, it’s not a stretch to imagine new legislation coming down the pike to tax retirement plan assets (like the excess plan accumulation tax that has been proposed). Other possibilities include accelerating required minimum distributions to achieve a faster payout taxation of the plan and eliminating the “stretch” provisions (this has already […]
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.