Maximize Your Retirement Savings with a Roth IRA Conversion

Looking to optimize your retirement savings strategy? Consider a Roth individual retirement account conversion, a tactic that can be particularly advantageous during a lower-income year. This process involves transferring pretax or nondeductible IRA funds to a Roth IRA, providing the potential for tax-free growth and future tax-free distributions.

It’s important to note that while you’ll still owe regular income taxes on the converted balance, your tax bill could be lower if you’re in a smaller tax bracket. Wealth advisor Catalina Franco‑Cicero from Tobias Financial Advisors, Plantation, Florida, suggests waiting until closer to the end of the year to make this decision, giving you a clearer picture of your projected income for the year.

Take Advantage of the 0% Capital Gains Bracket

Another smart move to consider is leveraging the 0% long-term capital gains tax bracket if your income qualifies. By rebalancing a taxable portfolio or saving on future taxes, you could benefit from significant savings. For the 2024 tax year, you may qualify for the 0% long-term capital gains rate with taxable income of $47,025 or less for single filers and $94,050 or less for married couples filing jointly.

Married couples may find the 0% bracket particularly advantageous, as it is based on taxable income calculated after deductions. This wide bracket offers opportunities for tax-efficient strategies, such as resetting an asset’s purchase price to save on future capital gains.