Getty Pictures. Financial experts suggest that delaying a year-end Roth individual retirement account conversion may pose risks. Roth conversions transfer pretax or nondeductible IRA funds into a Roth IRA, allowing for tax-free growth to begin. The compromise involves paying taxes on the converted amount initially, which raises your adjusted gross income. This approach has gained popularity, seeing a 46% increase year-over-year in the second quarter of 2024, as reported by Fidelity. Additional insights from Personal Finance indicate that while inflation has decreased, the middle class continues to face challenges. Here’s why there is still an opportunity to lower your tax bill for 2024 with these tactics. Recovery paradox: Reasons some women are struggling to manage their finances. Experts emphasize that the timing of Roth conversions is crucial, especially for those looking to finalize the process in 2024. Some investors prefer to pay taxes on Roth conversions now, taking advantage of lower tax brackets, as current rates are set to expire after 2025 unless Congress intervenes. However, anticipating future tax law changes is challenging due to the unpredictable control of the White House, Senate, and House of Representatives. This is why many Roth conversions occur at the end of the year. The end of the year is a favored period for Roth conversions since it is simpler to anticipate the tax impacts, as stated by certified financial planner Ashton Lawrence, a director at Mariner Wealth Advisors in Greenville, South Carolina. “You have a better understanding of your income sources” for the year, including bonuses, mutual fund distributions, or partnership earnings, he mentioned. Lawrence cautioned that Roth conversions increase your adjusted gross income, which might lead to additional tax implications, like elevated Medicare Part B and Part D premiums for retirees. It’s advisable not to delay Roth conversions. Experts suggest that although tax projections are crucial, you shouldn’t delay when considering a year-end Roth conversion. Tricia Rosen, a CFP and enrolled agent from Access Financial Planning in Newburyport, Massachusetts, noted that financial institutions may become busy if you wait until December. These companies often handle various year-end tasks, including qualified charitable distributions and tax-loss harvesting. She usually starts discussing the possibility of a Roth conversion or partial conversion with clients early on, as she prefers a more cautious approach. “However, I would like to complete it by the middle of November.”
