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I am the owner and founder of WealthTrace, which provides web-based financial planning software to both financial advisors and consumers.. I have over 20 years of experience in the financial markets and I am a Chartered Financial Analyst (CFA). I hold a masters degree in Economics from Miami ... more

Converting To A Roth IRA Could Be A Great Move

Date: Thursday, April 20, 2017 1:57 PM EDT

I recently wrote an article about this topic. The gist of that article is that most people don't need to consider converting their traditional IRA to a Roth. But there are exceptions. In some cases, making the move can increase a plan's probability of succeeding by several percentage points.

It basically comes down to tax minimization: Under which investment type are you more likely to reduce your tax burden over time?

As I have written about before on this forum, I like solid dividend paying stocks for retirement income. They may not be as certain as that imaginary secret income-generating investment I mentioned earlier, but some of them are pretty close. I like companies such as Chevron CVX, Coca-Cola KO, Southern Co SO, and Verizon VZ, which tend to kick out payments through thick and thin. Some of these companies have boosted their dividends every year for decades. If you're investing your IRA money in these stocks ahead of retirement, might it make sense to move some or all of that money to a Roth over some period of time?

Using the publicly available WealthTrace Financial Planner, you can enter your spending, saving, and investment information, and then use the Roth IRA Conversion tool to see what might happen if you converted your traditional IRA to a Roth.

In this case, the probability goes up, due mostly to the fact that taxes drop so substantially.

Like I say, for most people, converting probably is not necessary. But given what is at stake, it's definitely worth having a look using a tool that takes probabilities into account.


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