These retirement accounts are taxed in different ways, and you’ll want to be aware of the financial implications before you make any decisions.
If you have a self-directed IRA or 401(k) and want to convert it into a Roth IRA, you may be concerned about your options and taxes. These retirement accounts are taxed in different ways, and you’ll want to be aware of the financial implications before you make any decisions. In addition, strategies such as a discounted Roth conversion can be helpful for accredited investors with IRAs that have over $1 million in value.
When considering a Roth conversion, you’ll want to understand the difference between a self-directed IRA or 401(k) and a Roth IRA and what is involved in the process. It’s also useful to be aware of discounting from a tax planning perspective so you know what’s available.Self-Directed IRA and 401(k) versus Roth IRA
If you have a self-directed IRA or 401(k), the contributions you make each year will be deducted from your taxable income. This could reduce your tax liability for the year, and the funds can grow tax-free within the account. When you take withdrawals in retirement, the amount you remove will be subject to income tax.
