Taxes
How to Arbitrage Your U.S. Taxes for Difficult Economic Times
- Financial planners find a silver lining in beaten-down assets
- Belief tax rates will rise fuels renewed interest in Roth IRAs
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Pandemic-induced market volatility and warnings from Wall Street that tax rates are bound to rise have more Americans preparing to move money from traditional individual retirement accounts into Roth IRAs.
It’s an attempt at tax arbitrage. With traditional IRAs, a saver is required to begin making annual withdrawals and paying income taxes on them at age 72. If tax rates are likely to be higher then, the thinking goes, why not pay taxes on some of the money held in tax-deferred accounts now, at today’s presumably lower rate, and let it grow tax-free in a Roth?