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New Roth IRA Rules for 2010
Starting in 2010, the existing $100,000 income test for converting a traditional IRA to a Roth IRA no longer applies. Conversions that occur in 2010 will be able to have half of the taxable converted amount taxed in 2011 and the other half taxed in 2012. (On May 17, 2006, President Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 into law. This tax bill included a provision dealing with conversions of traditional IRAs to Roth IRAs.) Since Roth conversions increase tax revenues, it seems unlikely that the previous income ceiling will be reinstated anytime soon.
Pension Protection Act of 2006
On August 17, 2006, President Bush signed into law the Pension Protection Act of 2006. This law made permanent increased contribution limits to IRAs (including Roth IRAs) that would otherwise have expired after 2010. It also made permanent the Roth 401(k), which would otherwise not have been available after 2010. For additional information, see the Roth 401(k) Web Site.
Articles in Financial Press, Newspapers and...
Jan 21st, 2010Rethink that Roth: 12 traps to avoid when converting to a Roth IRA
"Roth conversions can trigger unintended tax traps and financial problems that are not being addressed in the mounds of 2010 Roth conversion information that currently dominates the media," Ed Slott wrote recently in his newsletter, "Ed Slott's IRA Advisor." These traps may make you reconsider when to convert, how much to convert, or even if you should convert at all.
Jan 21st, 2010Leveraged Roth IRA Conversion Ploy Warrants Scrutiny
Outfits are peddling Roth IRA conversions without a current tax hit. For the first time 13 million higher-income households with $1.4 trillion in IRAs can convert to a Roth IRA, with tax-free buildup and withdrawals. But under the law income taxes are due on the transferred amounts. There's no Roth IRA conversion tax advantage from buying leveraged life settlements that couldn't be gained simply by paying the conversion tax out of other assets or by taking out a loan just for the tax bill.
Dec 6th, 20097 Things To Know About Roth IRA Rules for 2010
Many of the basic rules and contribution limits have sustained, but what is creating most of the hype is the 2010 Roth IRA conversion event. One thing that hasn't changed is the tax free money waiting for you at retirement by contributing to a Roth IRA. If you plan on converting your Traditional IRA's and 401k's into Roth IRA's, I suggest you do it sooner than later...
Aug 19th, 2009The 401(k) Rethink
And what if your employer has a no-match 401(k) but no Roth option? If you are in a low tax bracket, you might do well to opt out of the 401(k) and put the money instead into your own Roth Individual Retirement Account up to the $5,000 maximum for 2009 ($6,000 for those 50 and over). Younger workers in particular can benefit from funding a Roth IRA.
Sep 2009Switching to a Roth Makes Sense Now
"Roth IRA conversions are the silver lining to the economic crisis," says IRA expert Ed Slott, a CPA in Rockville Centre, N.Y. "These may be the lowest tax rates you'll see for the rest of your life. And with account values down, it's a double sale."
Oct 30th, 2008Why Democrats Will Target the Investor Class in 2009
Democrats in the House are now talking openly about the longtime liberal dream of repealing the tax advantages of putting money into a 401(k) plan or other tax-advantaged retirement account.
Oct 28th, 2008A Tax-Savvy Way to Profit From the Panic
...for many, a Roth IRA conversion now is a good idea. But if you wait until the market recovers, you may well miss out on a great opportunity to cut your taxes forever.
Mar 6th, 2006 (update '08)Why You Need a Roth IRA
One of the smartest money moves a young person can make is to invest in a Roth IRA. When you're just getting started investing, the Roth should be your first stop -- even before you open a regular, taxable account, or contribute to a workplace retirement-savings plan. The only exception is if your employer offers a match on your 401(k) contributions.
Dec 11th, 2007Pay taxes now, spend more later
You will never retire on the money you save for retirement; you will retire on the money you make on the money you save for retirement. To make money on your retirement investments, get as much as you can into a Roth IRA as soon as you can. All of your profits will be free from income taxes after you hold them in your Roth IRA at least five years.
Sept 3rd, 2007Disinherited by Vanguard; Is it time to move your IRA?
In late July the Vanguard group sent 170,000 customers a form letter innocuously labeled: "Change in beneficiary policy will help you simplify your planning." A more candid heading would have been: "Warning! Unless you act, we're about to change who gets your Individual Retirement Accounts when you die." When FORBES showed Vanguard's letter to IRA experts, they were outraged. "This borders on the unconscionable," fumed Green Bay, Wis. CPA Robert Keebler. "It's crazy. I don't see how they can change the beneficiaries on your accounts without your consent," said Boston lawyer Natalie Choate.
Dec 31st, 2006Roth IRAs Save Dessert for Last
"I think people of all ages should be thinking about Roth IRAs, especially those who are young," Fahlund said. Otherwise, if you put pretax money into a savings plan at age 20 and leave it in until age 70 1/2 when you are required to begin withdrawals, "you have been growing taxes for Uncle Sam" for 50 years.
May 17th, 2006New tax law alters retirement-planning scenarios
Robert Keebler of Virchow, Krause & Co. in Green Bay, Wis., says the answer to question "convert or not?" will not be as easy as it sounds." You've got to factor in inflation, the client's life expectancy, investment returns, and what the client's tax rates will be in the future" he writes...
Aug 15th, 2005A Super-Charged Roth IRA
Starting January 2006, the Tax Act gives 401(k) plans the ability to offer participants a "Roth" option. Like its IRA cousin, contributions would be made from after-tax dollars, so you wouldn't get a tax deduction for contributing to this part of your 401(k).
Feb 23th, 2005Getting going: Beating the taxman in retirement
Here are four reasons retirees may want to convert their regular IRA to a Roth IRA.
- If you are in a low tax bracket, the income-tax bill will be modest.
- You get tax-free growth thereafter.
- No distributions are required during your lifetime.
- If you convert to a Roth and pay the necessary taxes, you will shrink your taxable estate -- and you'll be able to bequeath a pool of income-tax- free money to your heirs.
Roth IRA Conversion Considerations
...there is no easy answer to the Roth IRA conversion question. All of us must examine this issue using our own set of circumstances to determine the pros and cons as they pertain to our situation.
May 24th, 2004Conversion Time
Roth conversions are allowed only for taxpayers with "modified adjusted gross income" of $100,000 or less--before the income recognized from a conversion is counted...As of 2005 those 70 1/2 and older, who are forced to take distributions from a traditional IRA, won't have to count those forced minimum payouts in calculating that year's modified adjusted gross income. "...you can leave all of the Roth to your children or grandchildren and they will have years or even decades (depending on their ages when they inherit) to deplete it." Converting to a Roth is essentially risk free in the short term...
Apr 16th, 2003Why the Roth Rules
If you're confused about which type of retirement account to choose, here's the quick and easy (and probably smartest) strategy: Put your money in a Roth IRA.
Apr 3rd, 2003More bang for retirement buck
Representatives Rob Portman, a Texas Republican, and Benjamin Cardin, a Maryland Democrat, are preparing legislation that would allow individuals to increase their IRA retirement plan contributions to $5,000 for those under age 50 and $6,000 for those over 50, the Wall Street Journal reported.
May 31th, 1999Kinky IRAs
If you're interested in unconventional assets, it's worth boning up on the rules... In general, the law on IRA investments says not what you can do, but what you can't.
Aug 25th, 1998Roth IRAs: The Newest Way to Avoid Probate
...the Roth IRA can also be a great way to leave money--lots of it, if you're a supersaver--to your heirs without probate.
Aug 10th, 1998You should live so long
This article takes a look at some of the unusual effective dates for tax provisions, particularly the new law which provides for not including minimum distributions in the $100,000 AGI test for Roth IRA conversions (starting in 2005!).
Jul 11th, 1998Guide to the Roth IRA: Tax on Social Security
...don't be overly influenced by what may turn out to be a negligible effect.
Jun 2nd, 1998The Roth IRA Rollover: Have you considered the financial aid consequences?
The timing of this rollover can dramatically effect the family's ability to qualify for financial aid during college years.
May 15th, 1998How to Start a Roth IRA
We have received a number of requests for this type of information. This informative article is on a web site that has a lot of excellent consumer-oriented information on Roth IRAs.
April 20th, 1998In Roth we trust
Using a Roth IRA in combination with a trust offers enormous bang for the inherited buck.
Nov 17th, 1997Rothify now
The new Roth IRA is a great deal for people who want to leave sizable assets to their heirs. If you are an older person with a large IRA...Should you convert to the new so-called Roth IRA? Almost certainly, yes. That $100,000 ceiling is not as tough as it looks, especially for people who are retired.
Articles for Planning Professionals & Investors
Tax Treatment Of Roth IRA Distributions
The responsibility of determining the tax and/or penalty treatment of distributed Roth IRA assets rests with the Roth IRA owner.
Aug 8th, 2002After-Tax Assets in Qualified Retirement Plans-New Opportunities
Individuals who have accumulated after-tax assets in their employer sponsored retirement accounts may qualify for an unparalleled opportunity to convert the growth on those assets from tax-deferred to tax-free.
Jan 13th, 2002IRS Explains Result of Failed Roth Conversion
...there is no statute of limitations on the Service determining that the Roth IRA is improper.
Jul 7th, 2001The Economic Growth and Tax Relief Reconciliation Act of 2001 Summary
This is an excellent summary of the new tax cut bill and its many pension provisions.
March 13th, 2001Considering a Roth IRA Conversion In the Face of Possible Tax Cuts
The key to what I consider the most favorable strategy is the ability to "unconvert" a Roth IRA conversion.
Dec 23th, 2000Help! My Roth Has Fallen, and I Can't Get Up!
If the Roth IRA has suffered a severe decline in value, the tax savings from terminating the Roth will be minimal unless the current year's income is high enough to make the deduction worthwhile.
Jan 16th, 2001Life Simplified and Sweetened--Sweeping Changes for IRAs and Retirement Plans
...the IRS has made sweeping changes in the rules governing distributions of IRAs...
Dec 21th, 2000The Value of a Roth in an Estate
The inherited Roth IRA has a "hidden" value in the estate. The value of an estate should be measured in the hands of your client's heirs.
Jan 24th, 2000 (updated Jul 3rd, 2000)Roth 2K
This is a review of Roth IRA issues in 2000: conversions, recharacterizing, withdrawals, and more.
Oct 15th, 1999And Even More Time to Recharacterize
...even taxpayers who made a proper conversion to a Roth in 1998 now have until December 31, 1999 to change their mind.
Jul 5th, 1999The New Roth IRA Rules: A Small Price for the Benefits
This is an excellent detailed overview of Roth IRAs. Professional advisors will want to read this one.
Jun 27th, 1999There's Still Time to Recharacterize
A key planning point to keep in mind here is that the Announcement does not only apply to people to must recharacterize. It also applies to anyone who may want to recharacterize.
Feb 4th, 1999IRS Issues Final Roth Regulations
For the most part, the final regulations follow the proposed regulations...however, a major change with regard to conversions, effective in 2000.
Mar 1th, 1999There's Something About Roth
For many individuals, the Roth IRA is a better retirement vehicle than the traditional IRA.
Feb 3rd, 1999Recharacterizations-The Whys and the Hows
You have until the due date of the tax return, including extensions, to do a recharacterization.
Nov 16th, 1998The Roth IRA: A Detailed Overview
This an overview of the current state of the Roth including discussion of why and whether to convert and what to do if you have already converted.
Dec 24th, 1998All You Ever Wanted to Know About Roth IRAs But Were Afraid to Ask
This is a detailed examination of Roth IRAs including the technical corrections and proposed regulations. Professional advisors will want to read this one.
Oct 24th, 1998Top Ten Roth IRA Myths
You may use up to 100% of the amount transferred or contributed to a Roth even the day after you convert without any additional taxes (and no penalties if you are over 59 1/2).
Dec 15th, 1998Not So Fast: Full Conversions of Retirement Accumulations to Roth IRAs Can Be Costly
Personal financial analysts generally agree that the...Roth legislation requires an extraordinary degree of individualized retirement tax analysis and planning.
Dec 11th, 1998Roth IRAs: IRS Notice 98-50
This is a detailed review of the reconversion rules as limited in the IRS Notice starting 11/1/98.
Nov 10th, 1998New IRA Options Available: The Time to Start Planning is Now
An overview of the new IRA options that became available in 1998.
IRS Limits Availability of Reconversions
...the net result of this Notice will be to reduce the number of taxpayers who will do conversions.
Sep 2th, 1998Reversing a Roth Conversion
With recent drops in the stock market and the ability to unconvert later if desired, this would seem to be an ideal time to convert to a Roth IRA. Note: Reconversions have since been limited by the IRS. See Barry Picker's IRS Limits Availability of Reconversions.
Sept 8th, 1998CAUTION! On Age 70 1/2 Roth Conversions
It has been suggested for such taxpayers to postpone their initial required minimum distribution until the beginning of 1999 (prior to April 1st) in order to stay under the $100K...you CANNOT...
Aug 27th, 1998Roth IRA Myths
Roth IRAs are too good to be true. Tax-free compounding. Tax-free compounding. What else need be said?
Aug 13th, 1998Roth IRAs: 1998 Technical Corrections
...it appears that the Five Year Period starts running the first year a contribution is made to any Roth IRA, even if that contribution is as little as $1 and even if it is withdrawn the very next day.
Jul 9th, 1998Roth IRAs-New Planning Opportunities
...the new provision...permits a taxpayer who has made an improper conversion to undo it. The question now is whether this provision has created new advantages for taxpayers, that may not have been intended.
Jul 11th, 1998Roth IRA Distribution Taxation
The included chart clears up the rules as to how earnings on contributions and converted amounts are taxed and/or subjected to penalties. And, yes, there are cases where earnings are taxable even after the five year period as is shown in the chart!
Aug 10th, 1998TTCA-98 Brings Order To Roth IRA Distributions
While responsible for reporting Roth IRA distributions to the IRS, in most cases, a financial organization is not responsible for tracking the taxability of Roth IRA distributions, except for the return of certain excess contributions.
Jul 9th, 1998Roth IRAs-Technical Corrections
Hopefully, with all these corrections, Congress has now gotten it right.
May 1st, 1998IRAs After the TRA '97--What Hath Congress Roth?
The potential for tax-free growth is so compelling that all taxpayers who have substantial IRA balances and qualify for conversion should consider whether to convert at least a portion of their IRAs.
Mar 27th, 1998The Roth Legacy Trust (SM)
The Roth Trust will be receiving a lot of attention for estate planning purposes. This excellent article lucidly explains the concept.
Mar 25th, 1998An Introduction to Roth IRAs
This article is a detailed planning overview of the Roth IRA. If you read only one planning article, this should be the one. It is written by the author of Life and Death Planning for Retirement Benefits, which is simply the best available book on pension distribution planning.
Mar 28th, 1998Roth IRAs: Crunching The Numbers
...it would seem prudent to consider conversion of some part of the traditional IRA if for no other reason than to hedge potential income tax changes. Clients nearing the required beginning date who do not need the income are the best candidates...
May 16th, 1998Required Minimum Distributions for Traditional and Roth IRAs
...Roth IRAs are subject to Required Minimum Distributions rules after the death of the owner of the Roth IRA with a 50% penalty if such distributions are not made.
Jan 17th, 1998Five Financial Features that Make Conversion to a Roth IRA So Desirable
If you take significant advantage of the first two features, you will usually be ahead of the game (in many cases, this will be true even if you pay the conversion taxes from the IRA itself). ...income tax bracket considerations are usually of little importance if you can take advantage of the most favorable aspects of the Roth IRA.
Jan 17th, 1998Roth IRA Checklist for CPAs
List prepared by Robert S. Keebler whic is exclusive to Roth IRA Web Site.
Nov 19th, 1997Eight Reasons to Convert to a Roth IRA
List prepared by Robert S. Keebler whic is exclusive to Roth IRA Web Site.
Dec 26th, 1996Evaluating the Roth IRA: How Much Deferral Can You Handle?
There is no better tax shelter than the Roth IRA.
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