With the passing of the SECURE Act in December 2019, rules on retirement savings have changed, meaning that your retirement plans may have to change too. Since the required minimum distribution age has shifted from 70½ to 72, you might need to reevaluate your plan. For those of you who are still navigating through what these changes will mean, Total Resource Financial is ready to discuss proactive tax planning as opposed to reactive tax planning.
Proactive Planning: What is it?
While some people take a reactive approach to their planning — seeing specific trends in the market and recent legislature, and making decisions based on these events — a more proactive approach can be beneficial. Robert Keebler CPA, MST, AEP, an expert in the retirement planning field, suggests this approach in order to minimize taxes when passing your account on to a non-spouse heir. It involves evaluating your tax bracket and deciding whether you want to keep your traditional IRA or roll over into a Roth IRA. The SECURE Act creates an opportunity to reassess these parts of your plan and minimize your tax liability.
Family Tax Bracket Management
When converting your IRAs, you may want to look at your Family Tax Management Bracket. This phrase encompasses your current and future tax rate, as well as those of your beneficiaries, as they relate to your IRA. When looking at these choices, you may consider upgrading your traditional IRA to a Roth account. Keebler especially recommends this if you find yourself in a lower bracket than one of your beneficiaries.
Converting to Roth IRAs
Rolling over your traditional IRA into a Roth IRA is a significant step in proactive retirement planning, simply because a Roth doesn’t have the limitations that a traditional IRA comes with. The following infographic discusses reasons why converting to a Roth IRA can be a proactive measure:
Remember, when making the decision to roll over, you need to consider if you will need your money in the first five years, which bracket you project to end up in, and what money you are using for any taxes. If you are still unsure of your decision, allow the advisers at Total Resource Financial to help you come to the decision that is best for your future. Contact us today to set up an appointment with a member of the TRF team!