Close Menu
  • Home
  • Finance News
  • Personal Finance
  • Investing
  • Cards
    • Credit Cards
    • Debit
  • Insurance
  • Loans
  • Mortgage
  • More
    • Save Money
    • Banking
    • Taxes
    • Crime
What's Hot

What Happens to Authorized Users When the Primary Credit Card Holder Dies?

July 6, 2025

Return on capital employed (ROCE): Definition and how to calculate

July 6, 2025

Where China’s own investors are urged to hide out in the second half

July 6, 2025
Facebook X (Twitter) Instagram
Facebook X (Twitter) Instagram
Smart SpendingSmart Spending
Subscribe
  • Home
  • Finance News
  • Personal Finance
  • Investing
  • Cards
    • Credit Cards
    • Debit
  • Insurance
  • Loans
  • Mortgage
  • More
    • Save Money
    • Banking
    • Taxes
    • Crime
Smart SpendingSmart Spending
Home»Finance News»Many investors aren’t planning for traditional IRA taxes in retirement
Finance News

Many investors aren’t planning for traditional IRA taxes in retirement

March 8, 2025No Comments3 Mins Read
Facebook Twitter LinkedIn Telegram Pinterest Tumblr Reddit WhatsApp Email
Many investors aren’t planning for traditional IRA taxes in retirement
Share
Facebook Twitter LinkedIn Pinterest Email

Guido Mieth | Moment | Getty Images

‘Your IRA is an IOU to the IRS’

Traditional IRAs are the oldest and most common type of IRA, owned by 31.3% of U.S. households as of mid-2023, according to research from the Investment Company Institute.

Nearly two-thirds of families with traditional IRAs have accounts with retirement plan rollovers, and 43% made contributions on top of rolled over funds, ICI found.  

These accounts continue to grow, and many retirees don’t have a plan to withdraw the money, experts say.

“Your IRA is an IOU to the IRS,” said Slott, who is also a certified public accountant.

Starting at age 73, pre-tax retirement accounts are generally subject to required minimum distributions, or RMDs, based on your previous year-end balance and a life expectancy factor.

By comparison, Roth accounts, which are funded with after-tax dollars and grow tax-free, don’t have RMDs until after the accountholder’s death. But these accounts are less common. As of mid-2023, only 24.3% of households had Roth IRAs, according to ICI.

Leverage ‘bargain basement rates’

Under the Tax Cuts and Jobs Act enacted by President Donald Trump, income tax brackets have been lower since 2018. That provision could be extended past 2025 under the current Republican-controlled Congress.

Slott argues it’s better to pay income taxes now at “bargain basement rates” than withdrawing from a pre-tax IRA when rates could be higher, depending on future legislative changes.

You can do that by contributing to Roth accounts or making so-called Roth conversions, which incur an upfront bill, but grow tax free. With Roth accounts, “there’s no obligation to share with Uncle Sam,” he said.

See also  Payments giant Adyen reports 21% jump in third-quarter sales

Plus, Roth accounts avoid tax issues for non-spouse heirs who inherit your IRA since most beneficiaries must follow the “10-year rule,” and empty accounts within 10 years of the original owner’s death.

Roth-only strategy could mean ‘fewer options’

While building a bucket of tax-free retirement savings is appealing to many investors, there could be some trade-offs, experts say. 

With only Roth accounts, “you’re taking away choice from individuals … because they have fewer options down the road,” certified public accountant Jeff Levine said at the Horizons conference session. 

You should aim to incur taxes at the lowest rates possible, Levine told CNBC. By paying all your taxes in advance, there’s no “dry powder” to withdraw from pre-tax accounts in future lower-income years. 

Plus, you could miss future tax planning opportunities, he said.

For example, if you’re philanthropic, you can make so-called qualified charitable distributions, or QCDs, at age 70½ or older, which transfer money directly from an IRA to an eligible non-profit, Levine said.

The move lowers your adjusted gross income since you can use the withdrawal to satisfy RMDs and helps reduce your pretax balance for smaller future required withdrawals.  

Source link

Arent investors IRA planning Retirement Taxes Traditional
Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email
Previous ArticleCredit union launches digital bank supporting ‘local heroes’
Next Article Trump Signs PSLF Executive Order Limiting Eligibility: Who’s Affected?

Related Posts

Where China’s own investors are urged to hide out in the second half

July 6, 2025

Watch Fed chief Jerome Powell speak at an ECB panel in Portugal

July 6, 2025

TSLA, SG, AVAV, HAS and more

July 6, 2025
Add A Comment
Leave A Reply Cancel Reply

Top Posts

What is a special needs trust? Benefits and how it works

January 31, 2025

12 types of CDs: Which one is best for you?

March 13, 2025

3 Great Ideas from Barry Ritholtz’s Fantastic Book, “How Not to Invest”

May 31, 2025
Ads Banner

Subscribe to Updates

Subscribe to Get the Latest Financial Tips and Insights Delivered to Your Inbox!

Stay informed with our finance blog! Get expert insights, money management tips, investment strategies, and the latest financial news to help you make smart financial decisions.

We're social. Connect with us:

Facebook X (Twitter) Instagram YouTube
Top Insights

What Happens to Authorized Users When the Primary Credit Card Holder Dies?

July 6, 2025

Return on capital employed (ROCE): Definition and how to calculate

July 6, 2025

Where China’s own investors are urged to hide out in the second half

July 6, 2025
Get Informed

Subscribe to Updates

Subscribe to Get the Latest Financial Tips and Insights Delivered to Your Inbox!

© 2025 Smartspending.ai - All rights reserved.
  • Contact
  • Privacy Policy
  • Terms & Conditions

Type above and press Enter to search. Press Esc to cancel.