The SD-PFS*Ticker
Vol 9, Issue 2
June 2018

Summer on the brain? 
Now that tax season is happily behind us (for most folks anyway), our thoughts have turned to summer and less pressing issues. We'd like to suggest, however, that you give some thought to whether or not converting your traditional IRA to a Roth makes sense for you. 

Some of you may have seen this article published in the Schneider Downs "Our Thoughts On" series last month. But if you haven't, please take some time to read it here. Maybe now is the right time for you to convert your IRA to a Roth.

We also hope you'll take a few minutes to read the linked article below, written by Jason Staley, regarding the importance of continuing to allocate to core fixed income securities in your portfolio.

As always, please feel free to call us with any questions or comments at 412-697-5331.

Time to Revisit That Roth Conversion?
by: James Moyer, CFP ®

Thanks to the recently enacted Tax Cuts and Jobs Act, now could be the best time to convert your traditional IRA into a Roth IRA.
Roths have been in the public eye since 1997 when Congress passed the Taxpayers Relief Act. Due to income limitations and high tax brackets, however, many individuals have been unable to take advantage of the Roth, either through annual contributions or conversion of a traditional IRA.
What makes the Roth so special? Both types of IRAs allow assets to grow on a tax deferred basis, but there are three key differences. The first has to do with the deductibility of the annual contribution. Some individuals can fund a traditional IRA with pretax dollars - that is, a tax deduction is received when the contribution is made - but Roth IRAs are funded with after-tax dollars, so the annual contribution is not deductible.
The second difference, and the great appeal of the Roth IRA, is how the assets are taxed in the future. Contributions to an IRA will grow tax-free until you start to withdraw from it, then you will pay ordinary income taxes on each withdrawal. With a Roth IRA, you never have to pay taxes on it again, meaning the growth is completely tax-free upon distribution (though at that point you must have had the account opened for at least five years and be over the age of 59½).
The third, and what we believe to be the most important difference to retired individuals over age 70, is that required minimum distributions (RMDs) do not apply to the Roth IRA. As a reminder, when one reaches age 70½, the IRS requires annual distributions based on the age and account balance of the traditional IRA owner. High-income earners tend to retire with large IRA balances, and they often do not need to withdraw. Being able to avoid taking RMDs is a huge financial benefit, one that should greatly increase the value of your assets over time, if not for you, then for your heirs.
Here are a few scenarios in which a Roth conversion may be the best choice for you. 
  1. If your effective tax rate this year will be less than what it was last year under the 2017 tax brackets, you might want to capitalize on the decrease in rates before they revert back to 2017 levels in 2026 (the new tax law sunsets at the end of 2025).
  2. Your tax bracket may be higher during your retirement years. In practice, we have seen this happen when clients turn 70½ and have to start taking required minimum distributions.
  3. You are just starting your career and have many more working years to go. Because you haven't hit your highest income earning years, you should take advantage of the lower tax rates you are subject to. Each year your income rises, your taxes will as well.
  4. Some people are fortunate enough to not need their IRA funds in retirement, and they want to leave that money to their heirs. Converting your traditional IRA to a Roth IRA will allow you to avoid taking RMDs when you turn 70½, which over time can maximize the benefit for your heirs.
  5. Along with the new tax changes come opportunities - ones that may benefit you. Converting to a Roth IRA could be a great strategy, but understanding if and when you should move your traditional IRA to a Roth can be difficult. Please consult with your Schneider Downs Wealth Management Advisor to see if this form of financial planning will work for you.
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as investment, tax or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.

Why it's Still Important to Allocate to Core Fixed Income in Your Portfolio.

Please take some time to read this article, written by Jason Staley, CFA ® 
regarding the importance of continuing to hold fixed income securities in your portfolio. 

Cyber Security Tip

We're sure you've seen the news from the FBI asking you to unplug or reboot your router. This is a legitimate request, and good practice to add to your cyber security protocol. Rebooting will not remove potential malware, but it will disrupt it. To be on the safe side, make sure your firmware is up to date, change your password, and do a system reset to factory defaults. Warning: You will have to reconfigure your network settings after completing these steps.

What We're Reading
The Great Alone
By:  Kristin Hannah
Recommended by: Karen Werley

I read this book because I really enjoyed one of the author's other books, The Nightingale. This one was even better, with just as many twists and turns, tears, and moments of joy. It's the story of a family who moves to wild, rural Alaska to start over. Life is hard, and not all the changes they experience are good. The author vividly describes the struggles with the harsh environment as well as the natural beauty of Alaska. Along the way you'll feel the pain of living with and loving someone damaged by the Vietnam War who is trying to make a life for his family. There are many characters to love in this story, especially strong women, and I came away with a new appreciation for the strength and durability of the human spirit.

Protecting your Assets

Don't be surprised when someone from our office calls you to verify money movements. Our custodians report that scams occur most often via emailed instructions. Wire transfers used to be the vehicle of choice, but now even EFT transactions are being targeted.

Our Team In The Community

This photo of Alissa Shawl, along with Jason and Britt Staley, was taken at the Pittsburgh Zoo & PPG Aquarium Gala - Excursion to the Exotic, on Friday, June 8th. We are proud to be supporting this fine Pittsburgh landmark.