By LouAnn Schulfer, AWMA®, AIF®

If you own a retirement account, you likely know they come with a lot of rules. For example, in most instances, 59 ½ is the earliest age that you can make withdrawals without penalties and generally by age 72 you must begin taking Required Minimum Distributions (RMDs) from your pre-tax retirement accounts. The 12 ½ years in between can be an opportune time.

I have clients who were high income earners as well as great retirement savers during their working years. Their accumulated retirement savings allowed them to retire early, taking advantage of withdrawals without penalties. During their working years, their combined income had disqualified them from making ROTH IRA contributions and their tax bracket disincentivized them from doing ROTH conversions. A concern we identified is the income tax bracket they will be in after age 72. With their combined social security and required minimum distributions, their adjusted gross income (AGI) level would force them to pay higher Medicare premiums than their peers who are in lower income tax brackets. Fortunately, they are young enough and retired from their higher income years so that we can take advantage of ROTH conversions, where we will methodically move money from their pre-tax IRAs to ROTH IRAs, paying tax due from the conversions at a lower tax rate than they had been subject to while working. The money in

ROTH IRAs is not subject to RMDs, thereby lowering their taxable income at and after age 72, helping keep AGI lower which affects Medicare premiums.

My clients are excited to watch their ROTH accounts build and their future RMDs decrease, as we take advantage of this sweet spot for retirement accounts.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or [email protected] www.SchulferAndAssociates.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.