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Timing your taxes: Leveraging Roth conversions during early retirement can help maximize your tax efficiency. Beyond that, it all comes down to carefully analyzing your tax bracket. To begin, it can help to identify several windows of opportunity. They include:
📌 Before enrolling in Medicare: While employing Roth conversions between retirement and age 62 is ideal, they can still add tax value even if you do end up triggering Medicare means testing, depending on your financial situation.
📌 Before taking Social Security or pension income: Once these income streams are pulled, your taxes could be higher.
📌 Before RMDs begin: Required minimum distributions begin at age 72. If you want to convert beyond that point, you could find yourself holding a retirement tax bomb.
📌 When markets are down: In times of market volatility, Roth conversions, regardless of the amount, can help eliminate a larger percentage of tax liability.
Plan now, to save later: Diffusing your tax time bomb can be likened to diffusing a real-life bomb. It takes time, consideration and precision.