During this time there are some strategies that you should consider implementing that can make for a better retirement. You are probably aware that the stock market has taken a pretty good hit due to the Coronavirus (COVID-19). You might consider doing a Roth Conversion.
It is not a difficult thing to do. You are probably aware that pretty much everything that is in the stock market is worth less than just a month ago. So during this time, while your portfolio is down, take advantage and consider taking the money you have currently invested in your Traditional IRA’s, 401(k)’s, 401(b)’s or TSP and convert them into a Roth IRA or Roth 401k.
Let me tell you what that means. The stock market is down roughly 30% and your retirement accounts that are invested in the stock market are worth less than it was just a month ago. This also means your tax bill, once you perform the Roth conversion, will be less than when the stock market was higher. In addition, if unfortunately, your income has been impacted lower due to the concerns of Coronavirus (COVID-19), you have a double whammy here. You get to convert a lot more money to a Roth because the values are down, but you also may pay a lot less taxes because your income is also down.
Now a Roth conversion is sometimes tricky to do, so I would always recommend that you get counsel so that you don’t screw it up. Doing a Roth conversion incorrectly will cost you and since the rules were changed, there is no more ability to go back and change your mind.
Let me give you the benefits of doing a Roth conversion. In the short-term, you are going to pay a little bit of taxes now, but for the rest of your life it will grow inside of the Roth, tax-free and when you take the income out it will also come out tax-free.
Our country has a spending problem. It is estimated that the upcoming Coronavirus (COVID-19) stimulus package will cost over $6 Trillion Dollars. Someone has to pay for that, including all the other debt that has been incurred from the years of over spending. Its just simple math. Taxes have to go up at some point. So consider taking advantage of times like this to do some Roth conversions and pay your taxes now on your Traditional IRA money while they are at the lowest, instead of in a few years when they will be a lot higher.