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New retirees: Don't overlook this tax-planning sweet spot

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New retirees: Don't overlook this tax-planning sweet spot
Seniors are likely to be in a lower tax bracket in the few years after retirement, creating a "sweet spot" for them to convert some of their traditional 401(k) or traditional IRA assets into a Roth account, according to this article on CNBC. By doing a Roth conversion during this time, they will be able to face a lower tax bill on the converted amount and reduce a potential large tax liability when they start taking required minimum distributions from these traditional retirement accounts. Distributions from a Roth IRA will not be subject to income tax. "This is a good time to look at whether some strategies can work that help with taxes," says an expert.

Opinion: Volatility is back. Are your retirement investments ready?
Retirement savers are advised to avoid making emotional decisions when markets become volatile, writes an expert on MarketWatch. Sometimes, these decisions, including selling stocks during a market correction, could result in a return gap, which "reflects the difference between the average return for a fund or index and what the average investor earned within the same investment," explains the expert. "That gap exists because that average investor, concerned about market corrections, often will pull out of the market, missing the recovery period and the ability to increase their return."

What happens to your Social Security benefits if you retire and then go back to work?
More seniors are retiring early only to return to the workplace after some time on a full- or part-time basis, according to this article on personal finance website Motley Fool. Seniors who are considering to "unretire" have the option of withdrawing their Social Security application within 12 months since they started receiving the benefits, provided they are below the age of 70. This option will require them to repay all the benefits that they and their dependents have collected from Social Security.

When to ignore the crowd and shun a Roth IRA
Converting traditional IRA assets into a Roth IRA could mean tax-free growth on investments and tax-exempt distributions in retirement, preventing any increase in taxable income that could boost Medicare premiums or levy on net investment income, according to this article on The Wall Street Journal. However, a Roth conversion is only recommended when clients are in low-tax-rate years. An expert also says that clients should skip this option if they have no funds from outside sources to cover the subsequent tax bill, or they want to avoid losses or increase in taxable income and tax bill for the year.

New tax rates could provide push to help defuse your 'tax time bomb'
The new lower tax rates under the tax reform law create a tax-saving opportunity for clients to transfer some of their pre-tax contributions in retirement accounts to a Roth or life insurance, writes an expert on Kiplinger. If clients keep the funds in tax-deferred accounts, they are expected to face a bigger tax bill when they start taking mandatory distributions at age 70 1/2, explains the expert. With this strategy, "today’s relatively low tax brackets can help greatly reduce, and could possibly eliminate, future income tax payments and the effects of future tax bracket increases."

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