Many people underutilize their retirement accounts, said Jason R. Escamilla, CFA of ImpactAdvisor.
This can be an expensive mistake, especially for moderate earners in high income tax brackets. Consider increasing your retirement contributions or moving funds from a taxable account to a Roth account. With Roth IRAs, you can withdraw contributions (not earnings) without paying taxes or a penalty.
“For example, if you’re over 50 and only putting in $20,000 of your income, you leave behind the chance to move $10,000 more into the 401(k) and convert $10,000 in a pre-tax IRA into your Roth IRA,” Escamilla said. “The combination of those steps can be tax neutral and the net effect is moving $10,000 of your wealth into a Roth IRA where all earnings are tax free.”
Side benefit: This $10K Roth conversion becomes available for withdrawl, penalty-free in five years.