IRA — pay the taxes NOW?
Hi Terry…
Question regarding IRA CDs that we opened based upon our tax preparer’s advice. At the time, we were told to put away the max allowable in order to save on taxes. Now, as we approach retirement, (I am 59-1/2 and my husband is 60), we are wondering whether or not we should start cashing those IRAs in as maturity dates come around…seems the tax savings idea is no longer a sure thing.
Thanks!
Terry Says
This is a really profound question, and I have been doing a lot of thinking about it. In fact, it will be the subject of an upcoming column.
What you are asking about is the balance between continuing the benefits of tax-deferred growth vs the potential of a future tax hike (not unlikely given our huge — and growing — national debt, not to mention the political climate).
For the meantime, I have a solution for you: After you retire, and when your income drops, consider converting part of the IRA rollover to a Roth IRA. Do this every year with a portion of your IRA. That way, you will still have money growing on a tax-free basis — but pay taxes at today’s lower rates.
That will work IF THE GOVT KEEPS ITS PROMISE OF TAX-FREE WITHDRAWALS FROM ROTH IRAs!
PS Have you done enough planning to make sure you can afford to retire at this young age?? Don’t take SS early — that will cost you roughly 85 a year. And if inflation is only 3 percent over the next 25 years, it will cut your spending power in half!
