IRA tax advice
Mr. Slott is a strong proponent of converting traditional individual retirement accounts to Roth IRA Roths Roths are funded with after-tax dollars, which means the contributions are not tax deductible. But once you start withdrawing funds, the money you put into the account plus what it has earned is tax-free.
But you will have to pay tax on the earnings of your traditional retirement account when you convert it because that money was growing tax-deferred, but he argues that it is worth it.
Well, maybe. First, this tax bill could be significant. When you switch from a Traditional IRA to a Roth, the amount you convert is added to your gross income for the year and you pay regular taxes on the conversion.
Second, you don’t really want to pay those extra taxes from your traditional IRA. Not only would that reduce the amount of money you’ll have for retirement, but if you’re not yet 59 and a half, you’ll also be hit with a 10 percent early distribution penalty, unless it is certain …
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