By Brian Bloxom, ChFEBCSM
Are you looking for a way to potentially lower your taxes in retirement? Roth IRA conversion benefits might be just what you need. By converting money from a traditional IRA or 401(k) and paying taxes now, you can give your retirement savings the chance to grow tax-free for the future.
But how do you know if a Roth conversion fits into your financial plan? At Sentinel Wealth Partners, we focus on giving you clear, practical guidance so you can make confident decisions tailored to your unique situation.
We’ll walk you through the differences between a traditional and Roth IRA, explain what a conversion involves, and highlight the Roth IRA conversion benefits, helping you decide if it’s the right move for your long-term financial goals.
Traditional vs. Roth IRA
A traditional IRA provides a tax benefit on the front end, meaning qualifying individuals enjoy a benefit sooner rather than later. Contributions are made with pre-tax earned income. At tax time, the contributions made over the last year are fully or partially tax-deductible based on income and whether you or your spouse are participating in a work-sponsored retirement plan.
Here’s a breakdown based on tax filing status:
- Single: The tax deduction phases out for those who are covered by a workplace retirement plan and have an adjusted gross income ranging from $79,000 to $89,000.
- Single: The tax deduction is available for any amount of AGI if the taxpayer is single and not covered by a workplace retirement plan.
- Married: The tax deduction phases from $126,000 to $146,000 for the spouse making traditional IRA contributions with a work retirement plan.
The 2025 max annual contributions into a traditional IRA is $7,000 (or $8,000 for those over 50). A traditional IRA also comes with a required minimum distribution (RMD), beginning April 1 after your 73rd birthday. (Note: Under the SECURE 2.0 Act, that RMD age will rise to 75 in 2033.) Ignoring the RMD will land you a hefty penalty fee.
Conversely, a Roth IRA provides a future tax benefit, once you’re ready to withdraw the funds. Roth IRA contributions are made with after-tax money you’ve earned through work. When it’s time to cash in, you will not be assessed any further taxes on the initial investment or the gains.
Unlike a traditional IRA, there are no RMDs associated with a Roth IRA. You may also withdraw contributions at any time, but be careful to not withdraw any of the gains before you’re 59½ years of age to avoid a 10% penalty fee.
Roth IRA Conversion and Taxes
A Roth IRA conversion is a tax strategy that normally involves converting tax-deferred savings (IRA, 401(k)) into a tax-free retirement account. In the case of a Roth IRA conversion, you’re ultimately deciding the future tax-free benefits of a Roth IRA are superior to paying the taxes now on pre-tax retirement money.
But how is that determined? A simplistic method may be to first consider your present tax bracket and whether you remain in this bracket (or ascend to a higher bracket) with the conversion. Then consider your potential bracket at and during retirement. If the current bracket is significantly lower than the future one, a conversion may make sense. If not or the brackets are equal, a conversion may not be advisable.
Is it Best for You? Let’s Explore Roth IRA Conversion Benefits
If you currently hold a traditional IRA and expect to be in a higher tax bracket when you start taking distributions, a Roth conversion might be a smart move.
Roth IRA conversion benefits go beyond taxes, and can influence your retirement planning, investment strategy, and even estate planning. Because these decisions can have long-term implications, working with experienced financial advisors can make the process smoother and more effective.
At Sentinel Wealth Partners, we help clients evaluate whether a Roth conversion is right for them and guide them step by step through the process. Take the first step toward optimizing Roth IRA conversion benefits and creating a more tax-efficient retirement by scheduling a complimentary consultation today.
Reach out by calling our office at 703-832-0164, sending an email to brian@sentinelwealthpartners.com, or using our online calendar.
About Brian
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) and Chartered Retirement Planning Counselor℠, CRPC® professional with 25 years of experience in financial advising. He founded Sentinel Wealth Partners to serve retirees, individuals approaching retirement, and individuals managing complex retirement plans such as company plans or federal benefits plans. His expertise and dedication to helping his clients achieve their goals make him a trusted resource that will help you feel confident in your customized retirement plan. Brian’s mission is to be available to his clients—all the time. He’s here to solve your problems, relieve your anxiety, and give you optimism for retirement. Because ultimately, your retirement should be about well-deserved enjoyment, and not about stress or anxiety. When he’s not working, you can find Brian spending time with his wife, Jessica, and their two sons, Spencer and Preston. He enjoys coaching soccer, serving in his community, golfing, and relaxing at his vacation home at Lake Anna, VA. To learn more about Brian, connect with him on LinkedIn.
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Sentinel Wealth Partners and Cambridge are not affiliated. Sentinel Wealth Partners is not engaged in the securities business. Cambridge does not offer tax or legal advice.