This retirement account is an ‘ou to the ars’ – but here’s when it makes senses, expert says

When Saving for retirementIt’s easy to funnel money into a pre-tax 401 (k) plan or individual retirement account without Planning for future taxesThos pre-tax funds, however, can be handy in some cases, experts say.

Often, investors roll pre-tax 401 (k) Accounts Into Traditional Iras, and the withdrawals in Retirement Trigger Regular Income Taxes, Depending on your tax bracket,

“Your Ira is an ouoo to the ors,” Certified Public Accountant Ed Slott Said during a session last week at the Horizons Retirement planning conference in Coronado, California.

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With uncertain future tax rates, slot pushes for savings in after-tax Roth accounts, which want incur taxes in retirement. He also likes to use Roth conversions,

Roth conversions movie pretax or nondeductive Ira funds to a roth Ira, which can kick-link-freeth after an upfront tax bill.

However, there are Scenarios where keeping some money in your pre-tax Ira makes sense, slott said.

Certified Public Accountant Jeff Levine Agreed. He Told CNBC He Prefeers Some “Dry Powder”-Pre-tax money in retirement accounts that can be strategically withdrawn for planning options.

By Comparison, “You’ve Alredy Paid Your Tax Bill” With After-tax Roth Accounts, He Said.

One Tax Planning Opportunity is for Retirs Expecting long-term care expenses, experts say.

A 2022 Research Brief From the department of health and human services found 56% of Americans Turning 65 That Year Will Develop a condition that requires long-term care services,

Whether it’s in-Home Health Aids or Assisted Living Facilites, Long-Term Care Expenses are RisingAccording to genworth’s annual survey.

But the Medical Expense Deduction Could Help Offset Theose Costs, According to Levine. For 2025, you can claim the tax break for expenses that exced 7.5% of your adjusted gross income for the year.

If you itemize tax breakes, the deduction reduces the amount of your income subject to tax. That means part of the medical expenses deeduction could be lost your income is too low.

“You wipe it out,” Levine said.

But that isesue could be solved with a large pre-tax Ira withdrawal in the year of high long-term care expenses, which boots your adjusted gross income for that year, he said.

There’s another tax planning options for investors with pre-tax Iras who want to give to charity, slott said.

Slott was referring to Qualified Charitable DistributionsOr QCDs, which are directed transfers from an individual retirement account to a Non-Profit OrganizationYou must be age 70½ or older to Qualify for a QCD.

While there’s no tax deduction for a QCD, The Transfer is Excluded from Your Income, Meaning It Won’T Boost Your Adjusted Gross Income.

If you want to leave assets to charge and adult child The original owner’s death.