Growing up I remember visiting my friend’s house often, but I was always a little bit intimidated to get into their house.

In the front yard they had a bull…horns and nose ring at all.

Apparently, I had watched too many “Looney Tunes” episodes because I always made sure to never wear a red shirt when I visited. I was convinced that the bull would immediately charge at me, ha ha.

After a couple of visits seeing how slowly I walked toward the front door, my friend’s mom told me I could come through their back door whenever I wanted.

It was such a relief…

I didn’t have to worry about being chased down by a bull any longer.

As the end of 2025 is rapidly approaching, I wanted to bring your attention to the potential benefits of contributing to or converting to a Roth retirement account before the Tax Cut and Jobs Act provisions expire. Or maybe even using a “backdoor ROTH” strategy.

The current tax advantages provided by the Act make this a strategic move to optimize your retirement savings.

The Tax Cut and Jobs Act, enacted in 2017, brought about significant changes to the tax code, including provisions that impact retirement planning. One notable change was the reduction in individual tax rates, providing an opportune time to consider Roth contributions.

Here is a chart that shows the general tax differences based on your filing status and income levels.

Here are some key reasons why contributing to or converting to a Roth account might be advantageous before the Act expires:

Tax-Free Withdrawals in Retirement:

• Roth accounts offer tax-free withdrawals in retirement, as opposed to traditional accounts where withdrawals are subject to income tax. By making contributions or conversions now, you position yourself to enjoy tax-free income during retirement, potentially enhancing your financial flexibility.

Diversification of Tax Liabilities:

• Owning both traditional and Roth retirement accounts allows you to diversify your tax liabilities. This strategic diversification can help manage tax consequences in retirement, giving you the ability to choose between taxed and tax-free income sources based on your financial needs.

Future Tax Uncertainties:

• As the Tax Cut and Jobs Act provisions are set to expire at the end of 2025, there is uncertainty about future tax rates and legislation. Locking in tax advantages now can be a prudent step to safeguard your retirement savings from potential changes in tax laws.

Estate Planning Benefits:

• Roth accounts offer advantages in estate planning, as they do not require minimum distributions during the account holder’s lifetime. This can be beneficial for passing on tax-efficient assets to heirs, providing a legacy of wealth with reduced tax implications.

Flexibility in Contributions and Conversions:

• The Act’s current provisions allow for flexibility in making Roth contributions and conversions. Taking advantage of this flexibility now allows you to tailor your retirement strategy to your current financial situation while enjoying tax benefits.

It’s important to note that everyone’s financial situation is unique, and it is important to determine the most suitable strategy for your specific circumstances.

If you have any questions or would like assistance in exploring the benefits of contributing to or converting to a Roth account, please feel free to reach out. We are here to help you make informed decisions about your retirement goals.