Should I choose a Traditional IRA or a Roth IRA?
Choosing between a traditional and Roth IRA often depends on your current tax situation, expected future tax rates, and whether you would prefer a potential tax benefit now or in retirement. Traditional IRA contributions may be deductible, depending on your income and workplace retirement plan coverage, while withdrawals are generally taxable. Roth IRA contributions are made with after-tax money, but qualified withdrawals are generally tax-free. Your income, eligibility, retirement timeline, and other financial priorities can all affect which account may be more appropriate. Learn more about the difference between traditional and Roth IRAs.
Should I roll over an old 401(k) to an IRA?
Rolling an old 401(k) into an IRA may offer more investment choices and make retirement assets easier to manage, but whether it’s the right decision depends on your specific circumstances. Before deciding, compare investment options, fees, services, withdrawal rules, account protections, and tax considerations. You may also be able to leave the money in your former employer’s plan or move it to a new employer’s plan if rollovers are accepted.
When does a Roth conversion make sense?
A Roth conversion may be worth considering if you expect to be in a higher tax bracket later, want to reduce future required minimum distributions, or would like to leave Roth assets to your beneficiaries. The taxable portion of the conversion is generally included in your income for that year, which can also affect Medicare premiums and other tax-related items. For these reasons, the timing and size of a conversion can matter as much as the decision to convert. Learn more about year-end Roth conversion decisions.
What is the deadline for a Roth conversion?
To count for a particular calendar year, a Roth conversion generally must be completed by December 31. The deadline for making a prior-year IRA contribution is generally the federal income tax filing deadline in April, but that later deadline does not apply to Roth conversions. Because processing times vary, waiting until the final days of December could prevent you from completing the conversion before year-end. The taxable portion is reported as income for the year of the conversion.
How are IRA withdrawals taxed in Connecticut?
Traditional IRA withdrawals are generally subject to federal income tax to the extent they consist of deductible contributions and earnings. Connecticut may allow eligible taxpayers to subtract some or all qualifying IRA distributions from state taxable income based on federal adjusted gross income and filing status. Qualified Roth IRA withdrawals are generally not subject to federal or Connecticut income tax. Learn more about how Connecticut taxes IRA distributions.
When do required minimum distributions begin?
Under current law, required minimum distributions generally begin at age 73 for people born from 1951 through 1959 and age 75 for those born in 1960 or later. These rules apply to traditional, SEP, and SIMPLE IRAs. Original Roth IRA owners do not have to take lifetime RMDs. You may delay your first RMD until April 1 of the following year, but doing so could result in two RMDs in the same calendar year and potentially increase your taxable income. Inherited IRAs follow different distribution rules based on the beneficiary and other factors. Learn more about required minimum distributions and inherited IRA rules for unmarried partners.
