Income restrictions can limit who is able to open a Roth IRA, and if you do meet the requirements, the annual contribution limits can be disappointingly low. The maximum annual contribution you can make to all your IRAs is $7,000 per year if you’re younger than 50, and $8,000 for age 50 and over.

Fortunately, you can avoid these drawbacks by moving a portion of your tax-deferred savings from a traditional IRA or an employer-sponsored plan like a 401(k) into a Roth IRA. There are no income restrictions or annual caps. While you’ll face a one-time tax bill in the year of the conversion, your account can grow tax-free from then on with no required minimum distributions. This can help preserve your money for longer and transfer it tax-free to your beneficiaries, while also potentially reducing your taxable estate.

Moving a large sum of tax-deferred dollars all at once can push you into a higher tax bracket, but you can avoid this by converting smaller amounts annually, therefore spreading the tax obligation over several years.

At Johnson Brunetti, we specialize in Roth IRA conversions for pre-retirees and retirees. We can assess whether a conversion is in your best interest and advise on the optimal amount and timeframe. Our sound advice can help you avoid withdrawal penalties, a higher income tax bracket, ineligibility for certain tax deductions and credits, increased capital gains taxes, increased taxation of Social Security income, and higher Medicare premiums.

We’ll recommend appropriate investments that align with your financial objectives, risk tolerance, and time horizon. We’ll also help you navigate the process and paperwork associated with the Roth conversion.