Personal Finance

Jul 2016


It’s hard to believe that we’re at the end of July and before you’ll know it, fall will be upon us. I question how many of us can even remember New Year’s Resolutions that we made at the beginning of the year. I think the great majority of us have forgotten about them as the reality of our daily lives take hold. Probably one of those New Year’s Resolutions dealt with something to do with your finances. One of the more popular New Year’s Resolutions is to get your financial house in order. That being said now is a great time to do some of those things with regard to your personal finances that will make a difference. The first thing that I think everyone should look at is Roth IRA conversions.

As far as I am concerned, everyone that has a traditional IRA ought to look for potential opportunities to convert that traditional IRA into a Roth IRA. I recognize the downside of this transaction in the fact that you are accelerating when you would pay taxes; however, that can be more than offset by the advantage of having money grow tax- free versus tax-deferred and having money that is not subject to required minimum distributions.

Everyone is eligible to convert an existing IRA into a Roth IRA. The one caveat is for those who are subject to required minimum distributions. If you are over 70 1/2 you’re not eligible to convert the required distribution. You can convert anything above and beyond that but not the required minimum distribution.

Always remember that if you convert and then later you decide you made a mistake, there is a relatively straightforward process where you can reverse the transaction. Therefore, if you decide to convert it is not set in stone.

It is also a great time of year to make new contributions to your IRA whether it is a traditional or a Roth. Most people wait until the end of the year to make their contribution and my question is why? The sooner you make your investment the sooner the money grows either tax-free or tax-deferred. Therefore, now is the time to make those contributions.

This year 401(k) contributions have increased to $18,000 and for those over 50 you can contribute 24,000. This would be a good time to not only review your 401(k) investments but to also look at your year to date contributions to make sure you are putting away the maximum possible. At the same time it makes sense to re-look at whether you should contribute into a Roth 401(k) or a traditional 401(k).

Like most New Year’s Resolutions when it comes to personal finance resolutions by the first week of January they are long forgotten. However, there’s still plenty of time this year to make some moves that will put more money in your pocket and after all, let’s face facts – it looks better in your pocket than it does anywhere else. Therefore, try to spend some time on your personal finances whether it is reviewing your investments or insurance coverages or even do a budget- it will be time well spent and the result will be more money in your pocket exactly where it belongs.

Good luck!

Rick is a fee-only financial advisor. His website is If you would like Rick to respond to your questions, please email Rick at -.