Recently, many of our clients have been asking about Roth conversions.
Many of them are navigating the opportunities and challenges that come with significant appreciated investments or large pre-tax retirement accounts. While this growth is fantastic, it can bring up important considerations around managing portfolio risk, protecting gains, and addressing potential future tax burdens.
To help with these challenges, two key strategies to consider are Roth conversions and harvesting capital gains. Both can be effective but do involve current tax consequences, as they accelerate income tax costs.
The big question is whether to focus on ordinary income, capital gains, or a combination of both when implementing these strategies.
We know deciding the best path can feel overwhelming, so we’ve created this flowchart to guide you. It walks you through important factors like:
- Your goals and future needs for these assets.
- How increased income might affect your current tax bracket.
- Projections of future income and tax rates.
- The potential impacts on Social Security, Medicare, and wealth transfer goals.
