The theme for this week is: Tax Time!

I’m explaining some of the most sweeping changes from the Tax Cuts and Jobs Act, and how those changes might impact you.

Let’s turn back to the realm of retirement planning and talk about Roth conversions.

Here’s how a Roth conversion works: Let’s say you’ve been saving for many years in a Traditional IRA or 401k account. At some point along the way, you decide you would like to convert those dollars into a Roth.

You’ll pay taxes on the amount you convert to the Roth today, which is kind of a bummer, but you won’t pay taxes on that money again, potentially lowering your taxes in retirement when you start pulling money out of that account down the road in retirement.

Sometimes when you make a Roth conversion, you later decide that was a mistake. This can happen for many reasons, namely that you get to the end of the year, find out that your income is now too high and the tax bill too great to fork over the money to pay the taxes on the Roth conversion.

That’s ok, because the law allows you to undo your Roth conversion. Or at least it used to. Not anymore! Roth conversions for 2018 and beyond are now irrevocable, so it’s important that you really take the time to understand and project the tax bite before you convert traditional 401k or IRA dollars to a Roth.

Your tax advisor is probably the best resource for understanding what the tax bite will be on any amount that you want to convert, so talk to your tax advisor and take advantage of their tools and know-how to help you make a smart decision.

That’s it for today. Thanks for listening! Tomorrow we’re going to talk about how getting organized with a checklist to compile all of your tax forms, receipts, etc. before you sit down to do your taxes can save you headaches, time, and money.

My name is Ashley Micciche and this is the One Minute Retirement Tip.

----------

>>> Subscribe on iTunes: https://apple.co/2DI2LSP

>>> Subscribe on Amazon Alexa: https://amzn.to/2xRKrCs

>>> Check out our blog: https://truenorthretirementadvisors.com/blog/

----------

Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, tax cuts and jobs act, tax reform, trump tax cuts, trump tax reform summary, trump tax cuts 2018, roth ira, roth conversion, roth ira conversion, roth 401k, roth 401k conversion