MDNews - Lower Hudson/Bronx

Roth IRA THE COVID-19 PANDEMIC has shaken up nearly every aspect of American life. To say it's been a difficult time would be an understatement. However, difficult times may open doors to new possibilities. Businesses are changing their ways of operating, and individua ls are exploring new avenues for investment. It may be time for you to consider some opportunities, as well. WHAT IS A ROTH CONVERSION? A Roth conversion refers to the transfer of an individual retire- ment account (IRA), either traditional, savings incentive match plan for employees (SIMPLE), or simplified employee pension (SEP)-IRA, into a Roth IRA. With Roth IRAs, you pay tax on the money before it transfers into the account. One benefit to having your money in the Roth IRA is that, unlike a traditional IRA, you currently are not obligated to take required minimum distributions (RMDs) after you reach age 72 (RMDs would be required to any nonspousal beneficiaries, however). Another benefit is that since the money was ta xed before going into the Roth IR A, any distributions are ta x-free. Keep in mind that ta x rules are constantly changing, and there is no guarantee that Roth IR A distributions will remain ta x free. WHY GO ROTH IN 2020? In the face of the market downturn after the COVID-19 out- break, you may be in a unique financial situation. For example, suppose you have an IR A account that was worth $1 million before the downturn, but it's currently worth $800,000. Perhaps your income has also decreased, potentially putting you in a lower tax bracket. Maybe you own one or more businesses that have closed, such as restaurants. You may not yet know if these businesses will be opening again in 2020. Your income could hypothetically be considerably lower this year than last year. However, this may present an opportunity. Less earned income may mean lower total taxes due on a Roth conversion, especially if the overall account value has dropped. NO TURNING BACK While this may be a good time for you to consider converting to a Roth IR A, remember that there's no turning back once you do. The Tax Cuts and Jobs Act of 2017 decreed that Roth conversions could no longer be undone. A Roth IR A conversion is a complicated process, and it's wise to involve your trusted financial professional. Please feel free to reach out with any questions you have about your situation. Keep in mind, this article is for informational purposes only and is making an assumption on an IR A account's value and applying a hypothetical drop in earned income. We recommend you contact your tax or legal professional before modifying your retirement investment strategy. Dave B. Rao is the founder of Rao Wealth Partners. He focuses his practice on helping to advise physicians, corporate executives and business owners on their unique financial situations. For more info, visit raowp.com. n Our firm does not render legal or tax advice. This article was written for our firm and provided courtesy of MarketingPro. Investments in securities and insurance products are NOT FDIC-INSURED/NOT BANK-GUAR ANTEED/MAY LOSE VALUE. Rao Wealth Partners is an independent firm. Securities offered through Cetera Advisor Networks LLC, member FINR A and SIPC. Advisory services are offered through Summit Financial Group Inc., a registered investment adviser. Client assets held at First Clearing LLC (a wholly owned Wells Fargo subsidiary). Summit and Cetera are affiliated are under separate ownership from any other named entity. in the Era of COVID-19 IS IT RIGHT FOR YOU? Conversion M D N E W S . C O M /// M D N E W S L O W E R H U D S O N / B R O N x ■ 2 0 2 0 F I N A N C I A L C H E C K U P ❰❰❰❰❰ 0 5

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