The Money Move Most People Miss Before Year End
Before the Rush | Part 2 of 4
Every year around this time I have a version of the same conversation.
A client comes in, we start talking about year-end planning, and at some point I mention Roth conversions. And almost every time, they say some version of the same thing.
"I've heard of that. I've been meaning to look into it. I just never got around to it."
And then December arrives and we're out of time.
So let's talk about it now, while there's still room to actually do something.
What a Roth Conversion Actually Is
A Roth conversion is when you move money from a traditional IRA or 401k into a Roth IRA. You pay taxes on the amount you convert in the year you do it. In exchange, that money grows tax-free and you never pay taxes on it again when you withdraw it in retirement.
That's the simplified version, but it captures the core idea. You're choosing to pay taxes now, at a rate you can somewhat control, rather than later when you have less control over what that rate will be.
Why This Time of Year Matters
The reason September and October are the sweet spot for this conversation is that by now you have a reasonably clear picture of what your income looks like for the year. You know roughly what tax bracket you're in. And you still have time to convert an amount that makes sense for your situation before December 31st closes the window.
A Roth conversion done in December is rushed. A Roth conversion thought through in September is intentional. There's a meaningful difference between those two things.
The Move Most People Miss Entirely
Here's something that comes up constantly and that a lot of people genuinely don't know.
If you're over 50, the retirement contribution limit is higher than the standard limit. It's called a catch-up contribution and it exists specifically to help people in the years leading up to retirement put a little more away.
The problem is most people don't realize it's available to them. Or they know it exists but assume they're already taking advantage of it when they're not.
Take action on this one this week. Check where you stand on your contributions for the year. If you're not on pace to hit the full limit including the catch-up amount, September is when you adjust your contribution rate so you can actually get there by December 31st. Waiting until November doesn't leave enough runway.
Who a Roth Conversion Is Most Relevant For
Not everyone is a candidate for a Roth conversion and I want to be honest about that. But if you're in a lower income year than usual, between retirement and required minimum distributions, or concerned about future tax rates, it's worth a real conversation before the year ends.
What We See at The 611 Group
The conversations we have in September about year-end planning are some of the most valuable ones we have all year. Not because we're doing anything dramatic, but because we're doing something intentional while there's still time for it to matter.
A Roth conversion done thoughtfully. A contribution rate adjusted so the catch-up limit actually gets hit. These aren't complicated moves. They're just moves that require enough runway to execute well. September gives you that runway.
A Final Thought
If you've been meaning to look into Roth conversions or you're not sure whether you're taking full advantage of your contribution limits, now is genuinely the right time to have that conversation. The calendar is real and December comes faster than anyone expects.
Willie Schuette
The 611 Group Wealth Advisors