Market volatility like we’ve seen year-to-date 2016 is an opportunity to consider deploying timely financial planning strategies. One approach you may want to consider is a Roth conversion, turning your traditional IRA funds into a Roth IRA. This strategy is effective in reducing the tax liability retirees face when they are in the distribution phase of their retirement. IRA distributions are 100% taxable at your ordinary income tax rate while funds distributed from a Roth IRA are 100% tax free if redeemed after the age of 59.5.

So why are volatile markets good times to consider a Roth conversion? At market lows you can convert more shares into a Roth IRA. Historically, those shares have appreciated back to market highs. Converting at lower prices helps minimize the tax implications of this strategy.

Another great planning strategy to consider in volatile markets is the gifting of shares. Many individuals provide annual gifts to their children and grandchildren in order to reduce the size of their own estate. For 2016, the annual individual gift exclusion is $14,000 to each donee; $28,000 if you are a married couple. It may be prudent to consider gifting shares when they’ve dropped in value, allowing you to gift more shares at a lower market value. Again if we look at the market historically, it has generally returned to previous levels after the volatility subsides. In essence, this strategy will allow you to gift greater dollar amounts over the long run in a more tax-efficient manner.

These can be complicated strategies from a timing and implementation standpoint. Rather than try on your own, give us a call today at Four Peaks Wealth Management (928-225-2474). We’ll evaluate these and other strategies that can help you meet your financial goals. Feel free to contact us online as well.