Broker Check

Roth Conversions

August 06, 2020
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Income taxes are at a historically low rate.  With our national debt it seems inevitable to us that income tax rates will go up in the future. With the lifetime stretch-outs of inherited IRAs now limited to 10 years for non-spouse beneficiaries, Roth IRAs are even more attractive for passing on assets to your family. More importantly to some, is that if (or when) income tax rates rise, having a Roth IRA for your own use provides a source of tax free income that can be used in place of other withdrawals that would be taxable. Your time frame, tax bracket, and ability to pay the taxes are all factors to consider. If you think you might benefit from doing a Roth Conversion call us with your questions and we can help. 

 

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.