The 2026 tax sunset makes now a critical time to consider converting your traditional IRA to a Roth IRA. Here are seven key reasons why this strategy might make sense for you—and how Your Choice Financial can assist with a personalized conversion plan.
1. Utilizing Favorable Tax Attributes
If you have charitable deduction carry-forwards, investment tax credits, or net operating losses (NOLs), converting to a Roth now can allow you to use these attributes before they expire, offsetting the tax liability of the conversion.
2. Significant Growth Potential
If you expect your assets to grow significantly, converting to a Roth IRA now can shield that growth from future taxes.
3. Lower Current Tax Rate
If your current tax rate is lower than what you expect it to be in retirement, converting now allows you to pay taxes at a lower rate, avoiding higher taxes later.
4. Use Cash for Tax Payments
If you have cash outside your qualified retirement accounts, you can use that cash to pay the taxes due on the conversion, allowing your entire Roth balance to grow tax-free.
5. Long-Term Investment Horizon
If you don’t need the funds for living expenses in the near future, converting to a Roth IRA can allow you to maximize the tax-free growth potential.
6. Spousal Considerations
If you expect your spouse to outlive you, converting to a Roth can ensure that they have tax-free access to retirement funds when needed.
7. Estate Tax Planning
Converting to a Roth can help reduce the size of your taxable estate, particularly if you expect to owe estate taxes. Since Roth IRAs don’t require minimum distributions, they can provide tax-free income for your heirs.