Seniors looking to manage their tax burden in retirement may consider utilizing home equity to fund a Roth IRA conversion, as suggested by Steve Resch, vice president of retirement strategies at Finance of America Reverse (FAR). This strategy can help shield wealth from potential future tax rate increases, but it is essential to consider individual circumstances and the potential impact of the 2017 Tax Cuts and Jobs Act.
While gifting money before the tax law’s expiration in 2025 could be an option for high-net-worth individuals, some financial advisers caution against using loans to fund tax liabilities. Marci Spivey, a partner of tax services at Cherry Bekaert in Atlanta, points out the importance of considering borrowing costs and having a repayment plan in place when using a loan for funding a Roth conversion.
The complexity of managing taxes in retirement highlights the importance of seeking professional financial advice and thoroughly evaluating all options before making decisions. While utilizing home equity for tax planning purposes can be a viable strategy for some individuals, it is crucial to assess the associated risks and potential long-term implications. As the landscape of tax laws and financial planning continues to evolve, staying informed and adapting strategies accordingly is key to successful retirement tax management.
