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Bear Market Roth Portfolio Conversion

The Nasdaq, the S&P 500 and the Dow Jones all peaked during Q4 2021 after a decade of a bullish investment sentiment, but since then equity investors are suffering a historic decline in their portfolios due to the global economy slowdown caused by the supply chain and the geopolitical challenges that impacted developed and emerging and poor counties, also the bad fiscal and monetary policies caused more damage than we should suffer.

The US equity market officially entered the bear market territory, also the economic cycle technically hit recession, but we are still waiting for the NBER report to make it official. Consumer is healthy though, and that is a good enough reason to help Jerom Powell land this plane softly.

Historically, Americans relied on real-estate, diversified retirement investments and time to accumulate wealth, retirement portfolio are either traditional (pretax) or Roth (after tax).

before you pick Roth or traditional, it's highly recommended to talk to your tax Advisor to make a well-informed decision that will impact your long-term financial wellbeing.

If you still have a long-time horizon until retirement, a Roth IRA conversion can be a big tax win when retirement portfolio loses around 20% of its value, because you pay less taxes for this conversion, after that all the remaining savings will grow tax free.

Investors should understand how to take advantage of a Roth IRA when a retirement portfolio has declined in value.

Transferring funds from a traditional IRA or 401(k) plan into a Roth account can be beneficial over the long-term because the assets grow tax-free in a Roth account, whereas in a traditional account an investor owes the taxes at distribution time. However, you’ll pay ordinary income tax rates on the amount converted.

Call your tax advisor to help you weigh out the associated costs as well as factor in other strategic-based decisions.

Here are three things to consider before making the move:

1. You pay less in taxes converting a portfolio that has declined 2. Taxes may go up in the future

3. You want to have cash outside the tax-qualified vehicles to be able to pay the tax on the conversation. Otherwise, you’re pulling from your ability to grow those assets tax-free.

Voyage Tax Consulting LLC will look at your unique situation and provide a suitable plan to help maximize your long-term tax savings.


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