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Can Converting to a Roth IRA Reduce Future RMDs?

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Sun, Apr 28, 2024 01:10 PM

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Tax and IRA expert Ed Slott says you may want to make this change earlier than you think. Pretax ret

Tax and IRA expert Ed Slott says you may want to make this change earlier than you think. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=53686&elqTrackId=36e2887e2cb34acea096db28efa5c513&elq=21d6816c9fc144f5a71310fdc860c7d1&elqaid=53686&elqat=1&elqCampaignId=27233) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] Pretax retirement accounts are the ultimate in immediate gratification: By investing money pretax, you’re able to see your balance grow faster than if you were to make aftertax (Roth) contributions. The painful part is pulling the money out in retirement, as withdrawals are subject to your ordinary income tax rate and required minimum distributions (RMDs) kick in once you pass age 73. [Tax and IRA expert Ed Slott and I recently discussed how making a series of IRA conversions]( pretax to Roth—can be a wise move, especially in the postworking, pre-RMD years. Ed says he recommends the strategy all the time and believes that retirees should start conversions earlier than they might think—ideally at age 63. For investors who are already subject to RMDs, Ed warns that 2023 RMDs could be on the high side, as most investor portfolio balances were enlarged at the end of 2022. Speaking of IRAs, [the new rules around inherited IRAs]( have been a very hot topic, not least because they’re complicated. Because of the confusion, the IRS has been waiving the excise tax that would normally apply to beneficiaries who are subject to the new rules, as [Morningstar contributor Denise Appleby writes in this article](. On the investing front, rising interest rates have recently upended what had been a comfortable working relationship for stocks and bonds: when stocks went up bonds went down and vice versa. In an excerpt from [a research report]( on diversification and correlations that Amy Arnott, Karen Zaya, and I recently worked on, [Amy explores the implications of this regime change for stock and bond investors](. You can also watch the three of us discuss all aspects of the research [in this special webinar on LinkedIn](. Finally, Amy and I had [a wonderful discussion with behavioral finance expert and author Meir Statman]( for [The Long View podcast](. In his insightful new book [A Wealth of Well-Being]( Meir explores the evolution of behavioral finance and how it’s impossible to talk about financial well-being without also considering all of the other aspects of well-being: mental and physical health and relationships, for example. He also discusses how humans can’t help themselves from comparing themselves with one another, as well as the implications that tendency has for financial decision-making. Meir is also on the agenda for [the annual Morningstar Investment Conference]( this year, along with luminaries such as Michael Kitces, Jeff Levine, and Savita Subramanian. We’ll be doing a live taping of The Long View with Oakmark’s David Herro and GQG’s Rajiv Jain onstage at the conference. If you’re a financial advisor, I’ll look forward to seeing you there! With warm regards, Christine Benz [Can Converting to a Roth IRA Reduce Future RMDs?]( Tax and IRA expert Ed Slott says you may want to make this change earlier than you think. [Find Out More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [Be Aware of These New Rules for Inherited IRAs]( Tax and IRA expert Ed Slott discusses whether there’s any way to lessen the tax bill. [Watch Now]( [IRS Extends Waiver of Excise Tax for Inherited IRAs, but Not RMDs]( The waiver for certain beneficiaries subject to the 10-year rule has been extended to 2024. Here’s what to know. [Get the Details]( [How Did Diversified Portfolios Hold Up in 2023?]( Delve into Morningstar's 2023 analysis of portfolio diversification strategies. Uncover insights on correlation trends, asset class performance, and what it all means for building diversified portfolios. [Get the Analysis]( [Meir Statman: ‘The Biggest Risks in Life Are Not in the Stock Market’]( The behavioral finance expert and author on the connection between financial well-being and life well-being, the role of social comparisons, and more. [Listen Now]( [How Rising Interest Rates Change the Relationship Between Stocks and Bonds]( A closer link between the two asset classes reduces the benefit of including both in a portfolio. [Dive In]( Get Top Stock Picks and Market Insights Every Week on The Morning Filter. Every Monday morning, Susan Dziubinski sits down with Morningstar Chief U.S. markets strategist Dave Sekera to discuss what's on his radar, new Morningstar research, and stock picks or pans for the week ahead. [Watch Now.](morningstar/streams?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=53686) Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2024 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602

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