Roth IRA Conversion:
Retirement Fund Planning Opportunities:
For those expecting a drop in income for tax year 2020, this could be the opportune time to consider a Roth IRA conversion. This way you are getting your money into the account when the values are at their lowest, making sure you get the benefit of tax-free growth when stocks rise.
The maximum amount you can contribute to a Roth IRA for 2020 is $6,000 if you’re under the age of 50 or $7,000 if you’re age 50 and older, phased out based on Adjusted Gross Income (“AGI”) as follows:
|Phase out AGI range|
|Single||$124,000 – $139,000|
|Married Filing Joint||$196,000 – $206,000|
For those that are unable to contribute directly to a Roth IRA due to the AGI limitation, there is no limit to the amount you can convert from a traditional IRA, SEP, SIMPLE IRA, 401(k), 403(b), or 457 plan into a Roth IRA. The amount converted is taxable in the year of conversion, so the ideal time to do this, is in a year when you expect to be in a lower income tax bracket. There are no limits to the number of conversions you can perform and there are no penalties for rolling a qualified account into a Roth IRA account. You must do the Roth IRA conversion through a trustee-to-trustee transfer or same trustee transfer.
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To estimate the tax impact of a Roth IRA conversion on your 2020 tax liability, download our 2020 Roth IRA Conversion Calculator below.