Concerned about future tax rates? You may want to consider converting your Traditional IRA to a Roth IRA. A Roth conversion is a permissible transaction that allows you to pay income taxes on some or all your retirement assets when you convert and benefit from taxfree withdrawals in the future.

Some benefits:

  • A Roth IRA allows for an after-tax contribution, tax-deferred growth, and taxfree distributions at retirement age.
  • You may pay lower taxes if your current tax rate is lower than your expected tax rate in retirement.
  • Inheritance or long-term wealth accumulation goals — Roth IRAs do not require investors to take required minimum distributions at age 72. Also, inherited Roth accounts offer taxfree distributions to any beneficiaries.
  • Tax diversification — What are your other sources of retirement income? Having both tax-free and taxable distributions gives you greater control. When is a conversion appropriate?
  • If your income is too high to contribute directly to a Roth IRA or if you have existing funds invested in a Traditional IRA, you may want to consider a Roth conversion.
  • If you feel your tax bracket is lower now than it will be in the future when you take a Roth IRA distribution, this could be an appropriate strategy. There are other considerations, so we encourage you to speak with us to learn more. We always recommend including your accountant or tax preparer in the final decision.
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YOU CAN CONVERT A TRADITIONAL IRA FROM ANOTHER COMPANY INTO A FAM FUNDS ROTH IRA

Thomas O. Putnam founded Fenimore in 1974 with two passions: conduct in-depth, firsthand, independent investment research and serve investors with excellence and integrity. Today Fenimore Asset Management, manager of the FAM Funds, is nationally recognized, yet locally rooted and independently owned. Decades have passed, but our approach endures.

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