Uncertainty in the market can create both challenges and opportunities, especially for those managing retirement assets. Recent market volatility, influenced in part by tariff-related developments, has reminded investors of the importance of strategic planning. If you have an IRA, now could be a good time to reassess your options.

At Mirus Financial Partners, we encourage our clients to consider two key strategies during periods of market instability: evaluating the potential benefits of a Roth IRA conversion and reviewing the timing of required minimum distributions (RMDs).

Why a Roth Conversion May Make Sense Now

One of the distinct advantages of a Roth IRA is that qualified distributions are entirely tax-free under current tax law. Generally, a distribution is considered qualified if the account has been open for at least five years and the account holder is age 59½ or older, becomes permanently disabled, or passes away.

While traditional IRAs are available to all individuals with earned income, eligibility to contribute directly to a Roth IRA is limited based on income. For 2025, individuals with a modified adjusted gross income (MAGI) of $165,000 or more—or married couples filing jointly with a MAGI of $246,000 or more—cannot contribute directly to a Roth IRA. However, these income limits do not apply to Roth conversions. That means even if you exceed the income threshold for contributions, you may still convert assets from a traditional IRA to a Roth.

Of course, there are tax implications. Converted amounts are treated as taxable income in the year of conversion and may also be subject to state taxes. The size of your IRA at the time of conversion can affect your tax liability—and potentially push you into a higher tax bracket. That’s why market downturns may present a window of opportunity: converting while values are lower can reduce the tax burden of the conversion. Knowing your situation is a good idea in any market. Speak speak with a tax advisor about a technique called “filling your bracket,” in which you convert just enough to avoid crossing into a higher tax tier.

Additional reasons to consider a Roth conversion include the potential for higher tax rates in the future. Unless new legislation is passed, current tax provisions are scheduled to sunset in 2026, which could result in higher rates for many taxpayers. Also, converting during a market dip aligns with a fundamental investing principle—buying low. Furthermore, Roth IRAs are not subject to required minimum distributions during the original account holder’s lifetime, offering greater flexibility in retirement income planning.

Understanding Required Minimum Distributions (RMDs)

Required minimum distributions are mandatory annual withdrawals from traditional IRAs, beginning at age 73 under current law. These withdrawals are calculated based on the account holder’s age and the value of the IRA as of December 31 of the previous year. For example, your 2025 RMD is based on your account’s value as of December 31, 2024—even if the value has decreased by the time the distribution is made.

While it is always permissible to withdraw more than the required minimum, failing to withdraw at least the minimum amount could result in significant penalties. That said, Congress has occasionally waived RMD requirements in response to major economic disruptions, most notably in 2009 and again in 2020. If markets become especially volatile again in 2025, it could be worth watching for potential legislative relief before taking your RMD.

Important Considerations

If you plan to convert traditional IRA assets to a Roth and are also required to take an RMD in 2025, it is essential to take the RMD first. Required minimum distributions cannot be included as part of a Roth conversion.

Additionally, it’s important to note that inherited IRAs generally cannot be converted to a Roth IRA. However, a surviving spouse who elects to treat an inherited IRA as their own may be eligible to convert the assets.

Strategic Planning Starts with a Conversation

Periods of market uncertainty are not necessarily a time to step back from retirement planning. In some cases, changes are a signal to take action. Whether you are considering a Roth conversion, evaluating your RMD strategy, or simply want to be sure your current plan aligns with your long-term goals, the team at Mirus Financial Partners is here to help.

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All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy will be successful. This content is for informational purposes only and should not be considered tax or legal advice. Please consult with a qualified professional before making financial decisions.