Market uncertainty—whether driven by tariffs, inflation, or geopolitical tension—can rattle even the most disciplined investors. But for IRA owners, volatile markets may also present unique opportunities to enhance long-term wealth strategies.
Here are two key strategies to consider for your IRA during unpredictable times: Roth IRA conversions and smart Required Minimum Distribution (RMD) timing.
1. Use Market Dips to Your Advantage with Roth Conversions
When markets decline, the value of your IRA may temporarily drop. While that’s unsettling in the moment, it could be the perfect time to convert traditional IRA assets to a Roth IRA.
Why convert?
-
Tax-free growth and withdrawals: Qualified Roth IRA withdrawals are tax-free after age 59½ and five years of holding the account.
-
No income limits on conversions: Even if you earn too much to contribute directly to a Roth IRA, there are no income restrictions on conversions.
-
Lock in current tax rates: Current tax law may to sunset in 2026, which would mean higher tax brackets in the future. Converting now lets you pay today’s lower rates.
-
Avoid RMDs later: Roth IRAs aren’t subject to RMDs during your lifetime, offering more flexibility in retirement.
Timing matters
Converting during a market downturn means you’re effectively paying taxes on a smaller account value. For example, converting a $100,000 IRA when the market drops 20% reduces your taxable income from the conversion to $80,000. This may also help you stay within your current tax bracket—an approach known as “filling your bracket.”
Note: A Roth conversion triggers a federal income tax bill (and potentially state taxes) in the year of the conversion. We recommend working with a tax advisor to determine an optimal amount.
2. Rethink Your RMD Strategy
If you're 73 or older (or turning 73 this year), you’re required to take minimum withdrawals from your traditional IRA. These Required Minimum Distributions (RMDs) are calculated based on your account’s value as of December 31 of the previous year.
For example, your 2025 RMD is based on your account balance as of December 31, 2024—regardless of what the market does in early 2025. This can be painful if the market drops after year-end, since you’d be withdrawing a percentage of a now-lower account.
While rare, Congress has suspended RMDs during years of extreme volatility (such as 2009 and 2020). If markets remain choppy in 2025, it may be worth waiting to take your RMD later in the year, in case similar relief is introduced.
Important tip:
If you plan to both take an RMD and convert assets to a Roth IRA in the same year, the IRS requires that you take your full RMD first before executing the conversion.
Final Thoughts
In a market that keeps investors guessing, proactive tax and retirement strategies matter more than ever. Converting to a Roth IRA and adjusting the timing of your RMDs can create long-term advantages—especially when done in partnership with a trusted wealth advisor.
At Samalin Wealth, we specialize in helping high-income professionals and retirees make informed, tax-efficient decisions about their IRAs. If you’re considering a Roth conversion or have questions about RMD timing, let’s talk.
