2018 US Tax Year End Planning: Pensions

Last updated: 2 November 2018

Generally, subsequent withdrawals from a Roth IRA are not taxable, and no minimum distribution is required each year after reaching age 70 ½ (unlike for traditional IRAs). Conversions are taxable in the US at ordinary Income Tax rates and so will create a tax charge for 2018 that must be met by other sources of cash. However, given the flexibility that a Roth may bring, taxpayers who are more suited to a Roth IRA from an investment perspective may wish to consider making the conversion now. Where contributions into the 401(k) plan or traditional IRA also involve a period of foreign service, available foreign tax credits may be used to reduce the liability. No NIIT (Net Investment Income Tax) is due on any distribution, conversion or rollover to/from a Roth IRA account.

What should I do?

Some people may want to consider transferring their traditional IRA/401(k) plan into a Roth IRA before the end of 2018.

We recommend that individuals seek professional advice where appropriate before taking any action, so please fill out the form below if you have any questions.