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Utilizing Roth Conversions as Retirement Tools

Posted By Lineweaver Financial Group
June 13, 2019 Category: Roth Ira, Roth Conversion, Traditional Ira

Many people close to retirement are unaware of the many reasons why a ROTH Conversion can be a great retirement strategy. A good example of someone who successfully used a ROTH conversion as a retirement tool is Max Levchin, one of the Founders of Paypal, and later Yelp. He placed around 3.9 million shares of Yelp into his ROTH IRA. The share values have previously been higher, but recently it’s been trading at about $36 per share, meaning he has over $140 million in the ROTH alone. That isn’t just impressive because of the amount, but because a ROTH will allow it to continue to grow tax-deferred, and to later be accessed tax-free as well. A lot of people are asking themselves “well why don’t we have ROTH’s too?”, and it absolutely is something everyone should at least consider-- but the process itself isn’t quite that simple. When it comes to choosing between a ROTH or Traditional IRA, there are a few things you should consider. One of the biggest concerns is your tax bracket. With a ROTH IRA, you’re really contributing money that has already been taxed at the rate that all your income is taxed. One way of thinking about a ROTH is that you’re paying tax on the seed, rather than the harvest. In the case of a Traditional IRA, your invested money goes in before tax, and the tax is taken out later – often much later – when you take minimum distributions. So, if you think your tax bracket will be lower after y