Stock Crash Consolation Prize #2:
Cheaper Roth Conversions.
Converting a Traditional IRA to a Roth IRA means paying taxes now on
your retirement account assets instead of paying taxes when you take the money
out in retirement. But once the money is
in the Roth IRA account, it will grow tax free moving forward with all the
money available to you in your golden years.
While a Roth conversion may or may not be right for you, it is cheaper
to convert when the market is down. Let’s
say you have 100 shares of Apple in your Traditional IRA and were thinking
about converting those shares in September.
If you did so, you would have to pay taxes based on the value of Apple
at the time which was around $22,000.
But if you procrastinated and still want to convert the shares, now you
can do so with the value of your Apple stock around $15,000 and only pay taxes
on this much lower value. Same shares
converted, less taxes paid. Stock crash:
bad. Cheaper Roth conversions:
good. There’s rules and nuances you
should know before converting but at least you have another consolation prize
from this stock market chaos.
Larry Pike, CFA
Client Priority Financial Advisors LLCwww.clientpriority.com
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