Most olim with traditional Individual Retirement Accounts (IRAs) see them as a safe way to grow wealth for retirement. And they’re right—until taxes hit. The IRS lets you defer taxes for decades, but once you start withdrawing, you could face hefty tax bills that shrink your savings fast. The good news? You can take steps now to keep more of your money.
How Your IRA Can Backfire
Your IRA grows tax-deferred, meaning you don’t owe taxes each year. But by age 73 (or 75 for people born in or after 1960), the IRS forces you to take Required Minimum Distributions (RMDs)—even if you don’t need the money. Every mandatory withdrawal gets taxed as ordinary income, which can push you into a higher tax bracket.
For example, a $1 million IRA could mean a $40,000 taxable withdrawal the first year. Add other income or investments, and your tax bill grows fast.
How to Lower Your Tax Bill
Want to keep more of your hard-earned cash? Consider Roth conversions.
Instead of waiting for required withdrawals, move all or a portion of your traditional IRA into a Roth IRA. You’ll pay taxes upfront, but the money then grows tax-free—and when you withdraw, you’ll owe no American taxes. No RMDs. No surprise tax bills. Just more control over your retirement savings. That said, conditions apply. Not everyone is a good candidate for a Roth conversion. If you expect to be in a lower tax bracket in retirement, this strategy might not work in your favor. Be sure to check with your accountant or financial advisor before making a move.
Even If It’s Confusing, an IRA Is Still Worth It
The rules can be complicated—between traditional, Roth, conversions, RMDs, and tax brackets, it’s no wonder people feel overwhelmed. But don’t let that stop you. An IRA opens the door to smart strategies that can help you reach your long-term goals.
An IRA is more than a retirement account—it’s a flexible tool for growth, income, risk management, and legacy planning. The key is aligning it with your full financial picture, not just taxes. The right advisor can help you use the rules to your advantage.
To see how your IRA fits into your broader financial goals, you can schedule a free Cross-Border Financial Evaluation at profile-financial.com/call.
Douglas Goldstein, CFP® is the director of Profile Investment Services, Ltd. www.Profile-Financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates provide tax or legal advice.
Published September 17, 2025.