Recap:
On Wednesday, March 16th we hosted a tax planning event entitled “Bracketology and Buckets” where Allie and Steve discussed the importance of multiple income streams in retirement. We had a good turn out overall and the audience turned in some great questions. We have listed the top four questions below and included our answers – we hope they are helpful!
Q: Are there income limits on Roth conversions?
A: Fortunately there are no income limitations for Roth Conversions. To contribute to a Roth IRA, there are income limitations, in 2016 $117,000 for single filers and $184,000 for married filing jointly, but no income limitations for Roth Conversions. (According to irs.gov).
Q: How about limits on how much you can convert to a Roth from a traditional IRA?
A: There is no limit on the amount that you can convert to a Roth IRA from a Traditional IRA. You’ll just want to be sure to only convert the amount you’re comfortable paying income tax on in that year. Remember when you convert a balance to a Roth, you will owe ordinary income taxes on that amount.
Q: Why do we strive to have high safety margins if our strategy doesn’t involve leaving a large estate behind?
A: Life is unpredictable. Comfortable safety margins today will allow your plan to sustain all of the “what if’s” in life. It will give you the ability to deal with an unforeseen cost, should it arise. A common example is a health care event.
Q: How do the advisors at Higgins & DeYoung factor tax planning into retirement planning?
A: We utilize MyStrategy Independence, which is our custom approach to retirement planning. We’re able to take into account each unique piece of your retirement plan including the taxability of each account. From there we can put together a plan utilizing the most tax efficient income stream for you through retirement. Additionally, we do tax planning with our clients each year to take advantage of their current situations.
