ROTH IRA CONVERSIONS

We specialize in all aspects of retirement benefits planning and offer a tailored approach to help you achieve financial piece of mind.

Pension Payout Analysis
(Annuity vs. Lump Sum, Survivor Benefits, Timing)
Specialized NUA Analysis
Supplemental Incentives Analysis
Executive Benefit Plan Analysis
Roth Conversion Analysis
Cash Flow Planning & Tax-Efficient Strategies
In-House Tax Planning & Tax Preparation
Social Security Maximization
Estate Planning & Multi-Generational Planning
Health Insurance & Medicare Guidance

Are you planning to convert your current retirement account to a Roth IRA? This unique retirement savings vehicle is becoming increasingly popular among investors for several reasons. What is a Roth IRA? A Roth IRA contribution comes from income that has already been taxed. Therefore, initially there is no tax benefit, but the earnings on the money in the Roth account continue to grow tax-free.

Is the Roth IRA conversion worth it? Below is a guide on how to convert an IRA to a Roth IRA and the applicable Roth conversion rules.

• Accounts You Can Convert:  Converting from a traditional IRA is the most popular Roth IRA conversion.  However, you can also convert other accounts to a Roth IRA.  Funds in a Qualified Retirement Plan may be eligible for a Roth IRA conversion.
• 60-Day Rollover Rule:  As a general rule you can roll funds over from a traditional IRA account directly to a Roth IRA account.  However, this rollover must be within the 60-days of the IRA distribution.  If you fail to do so, the distribution becomes taxable in the year received.  Therefore, the conversion will not happen and the IRS early distribution  penalty of 10% applies.
• Trustee-to-Trustee Transfer:  Trustee to Trustee is the easiest way to handle the transfer.  This method eliminates the possibility of the money from your traditional IRA becoming taxable.  The entire transaction should be smooth since the funds move directly from your traditional IRA trustee to the ROTH IRA account trustee.
• Same-Trustee Transfer:  Same-trustee transfers tend to be easier than trustee-to-trustee transfers.  This is because the funds remain within the same institution.  The process is as simple as setting up a Roth IRA account with your traditional IRA account trustee holder.  You then direct the transfer of funds to the Roth IRA from the traditional IRA account.

The Roth IRA conversion is relatively simple.  Below are the basic steps to follow for a Roth IRA conversion:

1. Open a Roth IRA account.  You can open a Roth IRA account at a financial institution, or you can use a Roth IRA you already own to hold the converted account and/or funds you contribute.
2. Contact the plan administrators (trustees).     Consult with the new and old financial institutions to find out requirements for conversion.
3. Submit the necessary paperwork.  As soon as you know what paperwork you need to file, submit the paperwork to the financial institution either electronically, by mail or in person.
4. Pay income tax on the conversion.  Depending on the amount you are converting and your tax bracket, this amount could be substantial.

Roth conversion steps can usually be found on a financial institution’s web site.  Each institution has slightly different or varying steps to complete the conversion.

You should consider a Roth conversion in the following situations:You should consider a Roth conversion in the following situations:

• You earn too much to get a Roth IRA the conventional way
• You might face higher tax rates in the future
• Your income is low this year
• You want o leave your beneficiaries tax-free income

Fortunately, currently there is no limit to the number of Roth conversions you can do. However, you still need to adhere to the 60-day rule.

One of the key benefits of conversion is tax-free distributions. In addition, conversion reduces Required Minimum Distributions (RMDs) and the risk they might elevate your tax rate. Increasing ROTH assets may also elevate your tax diversification. In conclusion, ROTH conversion may a consideration for you.

There is no limit to how much you can convert. You can convert all or a part of your IRA to a Roth.

Roth conversions involve transferring retirement funds from a 401(k) or a traditional IRA account into a Roth account. This conversion may be accomplished by an asset rollover between the Roth and traditional IRA.

When considering a Roth conversion, they should be done with due diligence and possibly with the help of a financial professional. If you are considering a Roth conversion, or want to review how it fits in your investment plan; talk to us. Don’t navigate the Roth conversion planning process alone.