As a financial advisor, I’ve worked with people during life’s good times and inevitable challenges. The often overlooked fact is that during the “bad” times there can be financial opportunities available to you that aren’t there when times are flush and your income is strong and growing.
How could a reduction in income serve you well?
Let’s take the example of a Commercial Real Estate Broker in NYC. This broker’s income has been significant over the last several years. Times have been good in the commercial real estate market in NYC for a long time, but now tenants are leaving, leases are being renegotiated and some businesses are wondering if they will even return to a regular office environment. As a result, if the broker’s income will be dramatically affected in 2020 and or 2021, this drop will probably put this broker in a lower tax bracket. They can take advantage of this and use it as an opportunity to convert their IRA/SEP and or old 401K into a Roth IRA.
The downside to doing this is that you MUST pay ordinary income tax on the rollover; however, the tax dollars could be significantly less if this person is in a lower tax bracket. As many are aware, taxes are scheduled to go up in 2026; and with a new president, things might happen sooner. The Roth IRA has many benefits that can come in handy down the road.
1) All monies grow tax-free
2) All withdrawals will be tax-free
3) There are no RMD’s in a Roth IRA at any time
This will also work for anyone who has a significant drop in income; and therefore, might be in a lower tax bracket than normal. If you know someone who’s income has dropped, you might want to pass this on to them as it could be a little Silver Lining during these challenging times!
Brian Grodin
Financial Advisor
The Grodin Group
Direct: (212)536-6143
bgrodin@financialguide.com
http://www.linkedin.com/pub/brian-grodin/26/864/989
CRN202210-272895
