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Why Should You Talk to Your Clients About Roth Conversions?

Roth conversions represent one of the most beneficial tax techniques that an advisor has in their toolbox. Transitioning money from a traditional retirement account into a Roth IRA can have significant long-term tax benefits. Clients will pay tax on their initial investment and benefit from earnings that grow tax-free, allowing for withdrawals in retirement to be exempt from tax.

Financial advisors know that taxes can hurt their clients' retirement strategies. Still, some are hesitant to address the topic either out of uncertainty surrounding compliance issues or lack of expertise in optimizing tax opportunities in retirement. However, no retirement strategy is complete without first considering the tax implications of that strategy, and Roth conversions can make a big difference for many clients in or nearing retirement.

There are several reasons why converting to a Roth IRA may be advantageous, specifically for retirees and their beneficiaries. For instance, a Roth conversion can help your clients grow their wealth faster. The client will pay income tax as of the conversion date, but once it's in the Roth, it will grow tax-free, and future withdrawals will be tax-free, if certain conditions are met.

Roth conversions are different than Roth contributions; your clients can do them in any year, regardless of income and whether they’re working. Additionally, there is no contribution limit. Doing Roth conversions in otherwise lower-income years can spread out the tax liability over retirement and reduce the amount your clients pay in taxes throughout their lifetime.

How Much Should You Convert to a Roth?Your clients in or nearing retirement may plan on passing on their wealth to their children or other beneficiaries. A beneficiary can inherit the Roth IRA free of federal income tax. Plus, right now, there are no required minimum distributions (RMDs) during the owner’s lifetime under current rules for Roth IRAs, making Roth conversions a valuable option to continue growing wealth through retirement, so there will be more to pass on when the time comes.

”Essential Tax Techniques for Retirees: Roth Conversions” from Senior Market Sales (SMS) Financial Solutions can help you identify and assist clients in the Roth Conversion Process. In the guide, you will learn:

  • Why Roth conversions can heave a big impact on your retired clients
  • What you should consider before recommending a Roth conversion
  • When is the best time to convert
  • How much to convert to a Roth
  • Recent legislation and Roth conversions
  • How to use Roth conversions in your marketing strategy

To learn more about how SMS can help you with Roth conversions for your clients, give one of our marketing consultants a call today at 1.877.645.4939.

Download “Essential Tax Techniques for Retirees: Roth Conversions”

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