Financial Planning: Roth Conversions

Leveraging financial planning strategies is a key benefit of working with Acumen Wealth Advisors. As laws change, we work with clients to take advantage of new opportunities. Roth conversions are one financial planning strategy Acumen is implementing for clients. 

There are two primary retirement accounts used by most individuals:

Traditional IRA/ 401(k)

Roth IRA

In addition to a much higher standard deduction, the ranges for several tax rates have increased and the percentage has also decreased. The tax rates and corresponding income brackets for 2023 are:

Roth Conversion

Acumen’s financial planners work with clients to assess the IRA funds necessary to be converted on an annual basis to effectively reduce future tax liability while staying in the lowest current tax bracket possible. The Tax Cuts and Jobs Act of 2017 reduced the individual tax rates and effectively doubled the standard deduction, but these provisions are only temporary and will expire in 2026.

The effect of the 2017 tax cut can be seen with the annual federal deficit growing 60.31% from September of 2017 to September of 2019. Future tax rates are unknown, but it is widely anticipated the government will have to take some spending reduction and/or revenue increasing action to combat this deficit – actions such as increasing tax rates.

As it stands, the tax rates are set to increase in 2026 when the current tax law sunsets. Additionally, the applicable ranges will be lowered, and the standard deduction will effectively be halved.

Roth Conversion Benefits for IRA Beneficiaries

Inherited Roth IRA Benefits

We encourage you to reach out to our team to help you plan and protect your legacy.

* Withdrawals are not taxable as long as the account has been opened five years or the account owner is over age 59½. First home purchase and college expense exceptions also apply.

Information as of 06/28/2023