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Considerations for in-retirement Roth conversions: Retirement can be an opportune time for conversions if you’re in a lower tax bracket compared to your working years. Further, having sufficient cash to cover the tax liability is crucial. Being able to cover expenses and taxes in the year you carry out your conversion is most beneficial if you’re in a lower tax bracket.
Additionally, your age is a significant factor if you’re not yet subject to required minimum distribution (RMD) rules or if you haven't started claiming Social Security benefits. Roth conversions can reduce the value of taxable RMDs when applicable, and building a Roth account serves as a hedge against potential higher future tax brackets.
Estate planning advantages of Roth accounts: In light of post-Secure Act rules, beneficiaries of traditional retirement accounts must empty their account within 10 years of the owner's death. However, Roth IRA beneficiaries are not required to take RMDs during that period, and withdrawals remain tax-free.
If you’re considering a Roth conversion, it’s important to look at not just the impact it will make during your life, but beyond it as well.