Consider Roth IRAs. If you believe your tax rate is going to continue to increase, you may want to consider converting a traditional pretax retirement account into a Roth Investment Retirement Account (IRA), where the money can grow tax free. Qualified distributions from Roth IRAs aren’t subject to taxes. Though you’ll take a tax hit in 2014 for the conversion, you’ll potentially help lessen your tax bill down the road.
So now that I’ve filled up your investing to-do list for this year, let’s get back to the subject of your 2013 tax bill. I’ll leave you with the number one mistake Mr. Balasa sees people making when it comes to taxes: forgetting to take all the deductions they qualify for.
Sue Thompson, CIMA, Managing Director, is Head of the Registered Investment Advisor Group, overseeing the firm’s iShares and 529 sales efforts with registered investment advisors, family offices and asset managers. Sue is a regular contributor to The Blog. You can find more of her posts here.
Sources: Mark Balasa, BlackRock research