Should I Rollover My Traditional IRAs to Roth?

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Rolling traditional IRAs to Roth IRAs may not be the best move.

Roth IRAs provide many benefits.

Because the money contributed has been taxed, it can grow tax free.

When you take out money as income in retirement, you will not have to pay taxes on the contribution or the growth.

Although these are appealing benefits, there is more to consider.

According to a recent CNBC article titled “Before moving all your IRA money to a Roth, consider these lost tax benefits,” traditional IRAs provide their own benefits.

Traditional IRAs have financial benefits.
You may not need to choose between a traditional IRA and a Roth IRA.

How so?

An IRA can provide tax benefits with medical expenses, business losses, and charitable contributions.

For medical expenses, you can receive a tax deduction on the costs exceeding 10 percent of your income.

These expenses must be itemized, and they only count against taxable income.

Because a Roth IRA is not taxable income, you may want a traditional IRA to take advantage of this benefit.

If you prioritize charitable giving, you could benefit from a qualified charitable distribution from a traditional IRA.

When these funds are sent directly to the charity and itemized in your tax return, they will satisfy your required minimum distribution and will be excluded from taxable income.

The balance between these two IRAs is a delicate one.

If too much money remains in a traditional IRA, then you will have higher required minimum distributions in retirement and, consequently, higher income taxes.

It may be wise to rollover part of your traditional IRA to a Roth IRA.

If so, you should do this in a year where you are in a lower tax bracket.

Work with an experienced estate planning attorney and financial advisor to determine what balance meets your goals and circumstances.

Reference: CNBC (October 7, 2019) “Before moving all your IRA money to a Roth, consider these lost tax benefits”