Click here to join our weekly in-person and virtual educational workshops to secure your financial future.
Arrowroot Family Office
Search
  • Home
  • Services
    • Wealth Management Services
      • Investment Management
      • Individual Retirement Account (IRA)
      • 529 Plan
      • Corporate Retirement Plan
    • Financial Planning Services
      • Financial Planning
      • Retirement Planning
      • Estate Planning
      • Tax Planning
    • Multi Family Office Services
      • Accounting
      • Tax Efficiency
      • M&A Advisory
      • Wealth Strategy
      • Family Governance
      • Philanthropic Initiatives
    • form

      GUIDELINES TO FINANCIAL FREEDOM

  • Offices
    • Southern California
    • Northern California
    • Michigan
    • Virginia
  • About
  • Press
  • Contact
  • Client Login
  • BOOK A CALL
BOOK A CALL
  • Home
  • Services
    • Wealth Management Services
      • Investment Management
      • Individual Retirement Account (IRA)
      • 529 Plan
      • Corporate Retirement Plan
    • Financial Planning Services
      • Financial Planning
      • Retirement Planning
      • Estate Planning
      • Tax Planning
    • Multi Family Office Services
      • Accounting
      • Tax Efficiency
      • M&A Advisory
      • Wealth Strategy
      • Family Governance
      • Philanthropic Initiatives
    • form

      GUIDELINES TO FINANCIAL FREEDOM

  • Offices
    • Southern California
    • Northern California
    • Michigan
    • Virginia
  • About
  • Press
  • Contact
  • Client Login
  • BOOK A CALL
AFO2022-07-20T12:52:22+00:00

Roth Conversions: What they are and how they work!

A common question we receive when meeting with clients is “Should I convert to a Roth?” when discussing their retirement accounts. There are pros and cons to Roth Conversion and each situation requires an analysis of the individual or families’ financial picture. Before we get ahead of ourselves let’s discuss the basics.

Roth is a term used to identify AFTER TAX dollars. In a 401k or Traditional IRA people invest pre-tax dollars and are able to see those dollars grow from investments tax deferred. A Roth 401k or IRA is where people pay the taxes up front, then the money grows and there is no tax bill when it is withdrawn.

So what is a Roth Conversion? It is simply put, converting a Traditional IRA into a Roth IRA (or 401k, but this isn’t as common). The Traditional IRA account value is taxed at the individual’s current income tax bracket (paid Progressively) and transferred into a Roth IRA, where it will grow and not be taxed upon withdrawal.

When to do this conversion is specific to each individual, but based on simple math one can look at the two aspects of converting to a Roth: Account Value and Tax Bracket, and see that when these are both at their lowest, it is an ideal time to convert. If the market has taken a hit and the individual’s earnings are lower than anticipated, converting the IRA makes the most sense at that time.

Converting to a Roth may be a great way to offset business losses and seize an opportunity. If a business owner is going to harvest a loss for the year, they could convert their Traditional IRA to a Roth IRA in the amount of the loss and pay $0 in taxes for the conversion. They could extrapolate this and just use the loss to decrease the amount they have to pay. For example, if the owner has $50,000 in wages, a $40,000 business loss, and a $25,000 Roth Conversion, they would be left with the $35,000 in taxable income for the tax year.

You don’t have to convert the entire IRA, you can do it in portions. Be sure to talk to your Financial Advisor and your Accountant before initiating your conversions. If you would like a second set of eyes to review your situation and see if a Roth Conversion is the right fit for you, please contact us.

Roth Conversion

Share this post

Facebook Twitter LinkedIn Email WhatsApp

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Discover the Secrets of Financial Freedom​

Learn More

Services

Links

Newsletter

  • 4553 Glencoe Ave, Suite 201, Marina del Rey, CA 90292
    (310)566-5865
  • 2 Boars Head Ln, Suite 110, Charlottesville, VA 22903
    (626) 712-2090
  • 1107 Investment Blvd, Suite 160 El Dorado Hills, CA 95762
    (916) 384-0050
  • 725 Barclay Circle, Suite 125, Rochester Hills, MI 48307
    (248) 453-5252
  • Investment Management
  • 529 Plan
  • IRA
  • 403(b)
  • 401(k)
  • Corporate retirement
  • Retirement Planning
  • Tax Planning
  • Estate Planning
  • Financial Planning
  • M&A Mergers
  • Arrowroot Capital
  • Join Arrowroot
  • CPA Partnership
  • Press Releases
  • Careers
  • Events
  • Blogs
  • Clients Login
Arrowroot Family Office LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that AFO has attained a certain level of skill or ability. Content should not be construed as legal or tax advice, AFO is not engaged in the practice of law or accounting.

Form ADV Part 2.pdf

Form CRS .pdf

    Terms & Condition | Privacy Policy | Web Accessibility

Copyright © 2023 Arrowroot Family Office – All rights reserved.

Services

Links

  • 4553 Glencoe Ave, Suite 201, Marina del Rey, CA 90292
    (310)566-5865
  • 2 Boars Head Ln, Suite 110, Charlottesville, VA 22903
    (626) 712-2090
  • 1107 Investment Blvd, Suite 160 El Dorado Hills, CA 95762
    (916) 384-0050
  • 705 Barclay Circle, Suite 215, Rochester Hills, MI 48307
    (248) 453-5252
  • Investment Management
  • 529 Plan
  • IRA
  • 403(b)
  • 401(k)
  • Corporate retirement
  • Retirement Planning
  • Tax Planning
  • Estate Planning
  • Financial Planning
  • M&A Mergers
  • Arrowroot Capital
  • Join Arrowroot
  • CPA Partnership
  • Press Releases
  • Careers
  • Events
  • Blogs
  • Clients Login

Newsletter

Arrowroot Family Office LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that AFO has attained a certain level of skill or ability. Content should not be construed as legal or tax advice, AFO is not engaged in the practice of law or accounting.

Form ADV Part 2.pdf

Form CRS .pdf

    Terms & Condition | Privacy Policy | Web Accessibility
Copyright © 2023 Arrowroot Family Office – All rights reserved.
  • 4553 Glencoe Ave, Suite 201, Marina del Rey, CA 90292
    (310)566-5865
  • 2 Boars Head Ln, Suite 110, Charlottesville, VA 22903
    (626) 712-2090
  • 1107 Investment Blvd, Suite 160 El Dorado Hills, CA 95762
    (916) 384-0050
  • 705 Barclay Circle, Suite 215, Rochester Hills, MI 48307
    (248) 453-5252

Services

  • Investment Management
  • 529 Plan
  • IRA
  • 403(b)
  • 401(k)
  • Corporate retirement
  • Retirement Planning
  • Tax Planning
  • Estate Planning
  • Financial Planning

Links

  • M&A Mergers
  • Arrowroot Capital
  • Join Arrowroot
  • CPA Partnership
  • Press Releases
  • Careers
  • Events
  • Blogs
  • Clients Login

Newsletter

Arrowroot Family Office LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that AFO has attained a certain level of skill or ability. Content should not be construed as legal or tax advice, AFO is not engaged in the practice of law or accounting.

Form ADV Part 2.pdf

Form CRS

    Terms & Condition | Privacy Policy | Web Accessibility
Copyright © 2023 Arrowroot Family Office – All rights reserved.
Please note that you are exiting Arrowroot Family Office's website and entering one of a separate company. Arrowroot Family Office does not recommend or confirm any information on this site. Please read all disclosures on Arrowroot Family Office's website and that of the company's page you are about to enter. Continue Cancel