Financial Planning for Stay at Home Moms: Roth Conversions
What should Stay at Home Moms do with old 401ks?
Stay at Home Moms are in a unique spot, financially. They are not “earning” a paycheck, but they contributed financially to their household in the past and are now contributing to their household in a different way.
It is important for Stay at Home Moms to not put their personal finances on the back burner just because they are not earning a paycheck.
This is part 2 of my Financial Planning for Stay at Home Moms Series. In this blog post, we will discuss Roth Conversions for the Stay at Home Parent and why converting a Stay at Home Moms’ old 401k(s) to a Roth IRA could be a beneficial move for their retirement.
Financial Planning for Stay at Home Moms – What is better: Roth or Traditional IRA?
I often get asked by clients if they should contribute to an IRA instead of a Roth or vice versa or what is better? I can say that both have pros and cons and all factors should be considered. The rule of thumb I like to use is: those that contribute (or convert) to a Roth believe that taxes are lower now than they will be during their retirement.
Keep in mind that even if your income is going to be lower in retirement, you may still be in a higher tax bracket, or pay a higher tax rate due to legislation at that time. So, the thinking is you pay taxes now for the benefit of not having to pay taxes again on that money.
Traditional IRAs are the opposite. You reduce your income today, potentially pay less taxes now, and defer taxes until you start taking withdrawals and then taxes are paid on the withdrawn amount.
But, in any case, tax free income in retirement is fantastic.
I have been the only woman in a room of men in dark suits.
It can be intimidating.
My goal is to create an environment of comfort and openness for my clients.
The Greenway Wealth Advisory Blog
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