Retirement planning can be tricky! This news talks about a special type of retirement account called a Roth IRA. It's different from a regular IRA because you pay taxes now, but not later when you take money out.
Many people have money saved in traditional IRAs. Once they turn 73, they have to take money out every year, called RMDs (Required Minimum Distributions). This extra money can push them into higher tax brackets, meaning they pay more in taxes.
Converting some money from a regular IRA to a Roth IRA can help avoid those extra taxes later.
- Converting to a Roth IRA means paying taxes now, but you avoid taxes later.
- You can spread out the tax payments to make it easier.
- A Roth IRA doesn't have RMDs, so you don't have to take money out every year when you get older.
| Age | IRA Amount (Estimated) | RMD (Estimated) |
|---|---|---|
| 55 | $900,000 | - |
| 73 | $2,165,957 | $81,734 |
