Beth Pinsker at MarketWatch wrote about Roth conversions for people in their 20s and 30s, which sounds backwards to most readers because the standard advice is to wait for retirement. Her point, and mine, is that the trigger for a conversion is a low-income year, not an age.
I shared a client example with her. At 27, sitting in the lowest tax bracket of her career, she converted an old 401(k) rollover IRA to a Roth. The tax bill on the conversion was almost nothing, and every dollar of growth from that point forward is now tax-free for decades. That is tax-rate arbitrage: pay the tax when the rate is low, skip it when the rate would be high.
Business owners get more of these windows than almost anyone. A slow year building something new. A stretch of reinvesting everything back into the company instead of taking a salary. The year after a sale, before the next thing starts. Most owners never check their bracket during those years because it does not feel like a planning moment. It feels like a hard year to get through.
If you have had a lean year recently, or know one is coming, that is the year to look at. Not your age, and not the retirement calendar.
Read the full article at MarketWatch →
