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Roth IRA Conversions

Roth IRA Conversions

Roth IRA Conversions

The value of converting pre-tax retirement assets into Roth accounts has been discussed quite often in financial planning publications, but the after-tax benefits of making those conversions can be significant. A person’s marginal tax brackets at the times of conversion and distribution must be considered. However, the long-term value of tax-free compounded earnings in a Roth account will often outweigh any reduction of an individual’s marginal tax rate at the time of distribution.

Roth conversions can trigger additional hidden taxes in the year of conversion by:

  • Increasing the amount of Social Security income that's taxed.

  • Pushing your capital gains tax rates into a higher bracket.

  • Subjecting investment income to an additional 3.8% tax. (Net Income Investment Tax)

  • Decreasing the amount of medical expenses you can deduct.

  • Increasing Medicare premiums.

  • Reducing tax credits that are phased out based on income, such as the Child Tax Credit, Dependent Care Credit, and certain education credits.

See: https://www.investopedia.com/articles/financial-advisors/102715/pros-and-cons-creating-backdoor-roth-ira.asp

It may be psychologically painful to pay additional taxes at the time of conversion, but retirees should consider that if funds remain in a pre-tax retirement account, the Internal Revenue Service has a continuing claim on all earnings and principal in the account.

It is useful to think of Roth conversions as a form of longevity insurance. Although the nominal value of your retirement accounts may appear lower in the short term after conversion, in the long run, the after-tax value of these accounts could add hundreds of thousands of dollars to an individual’s retirement assets.

Fulcrum Wealth Advisors can provide clients with calculations showing the value of Roth conversions. We can also recommend amounts to convert to Roth accounts on an annual basis using tax projections based on a client's income and resources.

For more information and a discussion about Roth IRA conversions, see:

https://finance.yahoo.com/news/ask-advisor-wise-convert-10-120000534.html

DISCLOSURE:

Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax-free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase (up to a $ 10,000-lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

Investment advisor representative of securities and investment advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer, and Registered Investment Advisor. Cetera is under separate ownership from any other named entity. In addition, some Investment advisory services are offered through Fulcrum Wealth Advisors, LLC. Fulcrum Wealth Advisors, LLC is a registered investment advisor in the State of Washington.

Branch Address: 10940 NE 33rd PL., #210 Bellevue, WA 98004 Branch Phone: 877-400-0260

Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(877) 400-0260
info@fulcrumwa.com

Check the background of this investment professional on FINRA's BrokerCheck  →

Registered Representatives offering securities and advisory services through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRA/SIPC, a broker/dealer and a Registered Investment Adviser.

Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

Fulcrum Wealth Advisors, LLC is a state of Washington Registered Investment Advisory firm at: 10940 NE 33rd Pl., Suite #210, Bellevue, Washington 98004 United States.

Cetera is under separate ownership from any other named entity. Investment advisory services and tax consulting services are offered through Fulcrum Wealth Advisors, LLC.

This site is published for residents of the United States only. Financial Advisors of Cetera Advisor Networks may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisor Networks site at: www.ceteraadvisornetworks.com

​Fulcrum Wealth Advisors, LLC is a registered investment adviser in the State of Washington & Texas. We may not transact business in states where we are not appropriately registered, excluded, or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

© 2025 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct

Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(877) 400-0260
info@fulcrumwa.com

Check the background of this investment professional on FINRA's BrokerCheck  →

Registered Representatives offering securities and advisory services through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRA/SIPC, a broker/dealer and a Registered Investment Adviser.

Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

Fulcrum Wealth Advisors, LLC is a state of Washington Registered Investment Advisory firm at: 10940 NE 33rd Pl., Suite #210, Bellevue, Washington 98004 United States.

Cetera is under separate ownership from any other named entity. Investment advisory services and tax consulting services are offered through Fulcrum Wealth Advisors, LLC.

This site is published for residents of the United States only. Financial Advisors of Cetera Advisor Networks may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisor Networks site at: www.ceteraadvisornetworks.com

​Fulcrum Wealth Advisors, LLC is a registered investment adviser in the State of Washington & Texas. We may not transact business in states where we are not appropriately registered, excluded, or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

© 2025 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct

Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(877) 400-0260
info@fulcrumwa.com

Check the background of this investment professional on FINRA's BrokerCheck  →

Registered Representatives offering securities and advisory services through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRA/SIPC, a broker/dealer and a Registered Investment Adviser.

Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

Fulcrum Wealth Advisors, LLC is a state of Washington Registered Investment Advisory firm at: 10940 NE 33rd Pl., Suite #210, Bellevue, Washington 98004 United States.

Cetera is under separate ownership from any other named entity. Investment advisory services and tax consulting services are offered through Fulcrum Wealth Advisors, LLC.

This site is published for residents of the United States only. Financial Advisors of Cetera Advisor Networks may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisor Networks site at: www.ceteraadvisornetworks.com

​Fulcrum Wealth Advisors, LLC is a registered investment adviser in the State of Washington & Texas. We may not transact business in states where we are not appropriately registered, excluded, or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

© 2025 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct