Several of the most useful tax decisions of the year have to be finished by the time the ball drops on NYE, and from today you have a little over six weeks to make them.
None of them are right for everyone, and each depends on your own tax situation, so the last step for all four is a conversation with your CPA. They are still easier to think through in November than remembering on your way to Christmas Eve church service.
Is this the year to convert to a Roth?
A Roth conversion moves money from a traditional IRA into a Roth IRA. You pay income tax on the amount you convert in the year you convert it, and in exchange, qualified withdrawals from the Roth later come out tax-free.
The number that matters most is the tax rate you expect to pay in retirement compared with the rate you are paying now. If you expect your rate to be lower later, converting now usually costs more than it saves. If you expect it to be higher, it is worth a serious look.
You may not think you could move up a tax bracket in the years when you are no longer working, but depending on how much you saved, that could very well be the case once RMDs kick in.
Nobody knows their future bracket, but you can estimate it, and a conversion has to be completed by December 31 to count for 2026.
Have you finished your required withdrawals?
Once you reach the age where the IRS requires withdrawals from your traditional IRA, the amount for the year has to come out by December 31, and the penalty for missing it is real.
The rest is in your inbox.
The other three decisions, and the question to ask yourself this week. Drop your email and I’ll send you the full piece, plus a new decision every Wednesday.
For educational purposes only; not tax or legal advice. Please consult your tax professional about your own situation.
Insights, advice, and comments provided by RJ Finley and members of the Decidedly Wealth Management team should not be considered personalized financial advice or recommendations. This content is produced solely for informational and educational purposes. For personalized guidance, book a free conversation.
All Insights