October is Financial Planning Month, the perfect time to reflect on your financial goals and ensure your tax strategy aligns with your vision for the future. With the recent passage of the One Big Beautiful Bill Act (OBBB) making lower individual tax rates permanent, you now have a unique opportunity to craft a long-term tax plan with greater confidence and clarity.
A Stable Foundation for Strategic Planning
The OBBB has locked in lower federal income tax rates that were set to expire in 2025. This gives you a clear and stable tax landscape to plan your finances, whether you’re saving for retirement, a big life event, or building a legacy for your loved ones.
Roth Conversions: Seize the Moment
One powerful strategy to consider is a RothIRAconversion. By moving funds from a traditional IRA to a Roth IRA, you pay taxes on the converted amount at today’s favorable rates in exchange for tax-free withdrawals in retirement. This approach can be a game-changer if you expect:
- Higher income in the future, which could push you into a higher tax bracket
- Larger Required Minimum Distributions (RMDs) that may increase your tax burden
- Taxable Social Security benefits or Medicare surcharges that could erode your income
- A desire to pass tax-efficient assets to your heirs
The key to success? Play the brackets. Convert just enough each year to stay within your current tax bracket, avoiding unnecessary jumps to a higher rate. This strategy lets your investments grow tax-free over time, maximizing your wealth in retirement.
The Bigger Picture: Taxes and Your Financial Future
A smart tax plan is more than just preparing for April—it’s a cornerstone of your broader financial strategy. By aligning your tax decisions with your retirement goals, you can optimize portfolio distributions, preserve wealth, and create a more secure financial future. With the predictability offered by the OBBB, now is an ideal time to review your plan and make adjustments that set you up for long-term success.