to roth or not to roth

To Roth or Not To Roth? A Roth IRA (Individual Retirement Account) is a special type of retirement plan that is a powerful, “tax advantaged” investment product. The number one benefit of the Roth IRA is that individuals are able to grow and withdraw their wealth tax free. Source: RothIRA.com That Is The Question. Am I Able To Convert My Assets From a Traditional IRA to a Roth IRA? YES •Contributions are not tax deductible •Contributions are done on an after-tax basis •Contributions appreciate tax free •No limits as to how long you can make contributions •Income restrictions •No taxes are assessed on qualified withdrawals provided the account has been open for 5 years and the owner is 59 1/2 or older •Do not have a required minimum distribution at any age Roth IRA Characteristics Traditional IRA Characteristics •Contributions are typically tax-deductible oMitigating factors include age, income and whether you are covered by an employer retirement plan •Contributions are usually done on a pre-tax basis •You can only contribute until you have reached age 70 ½. •No income restrictions though deductibility depends on several factors •When a distribution is made, all pre-tax contributions, dividends, interest and capital gains are taxed as ordinary income •Must start taking a required minimum distribution at age 70 ½ What Is A Roth Conversion? A Roth Conversion is a distribution of assets, either full or partial, from a Traditional IRA that is then transferred into a Roth IRA. The assets converted to a Roth IRA become designated as Roth IRA assets. A Roth Conversion is considered a taxable event and the account holder will generally owe ordinary income taxes in the current year. Roth IRA Conversion Considerations- Ask yourself the following: •Taxes What will tax rates be when I need my money? Traditional IRA distributions are taxed at your ordinary income rate. If you think you will be in a higher tax bracket in the future it may be advantageous to convert now and pay taxes while your in a lower income tax bracket. Can you afford to pay the income taxes due from conversion from a source other than the IRA? It does not make sense to pay taxes from the IRA if you are not over 59 ½ because you will be penalized for the “distribution”. Converted assets are considered taxable, so a conversion could push you into a higher tax bracket What do you plan on doing with the money? Do you need the money in retirement? Do you intend to pass the money to your heirs? •Time Horizon You need time to make the conversion pay off, even assuming other considerations are favorable for conversion. Do you have enough years until retirement to be able to recoup the dollars lost due to taxes on the conversion? •Regulation Are you confident the government will not change the rules of the game? Tax law and Roth tax leniency theoretically could change THE BIG QUESTION? Should I Convert? It is always prudent to seek the help from a qualified coach in making decisions like this. Roth IRA vs Taxable Account Past performance is no guarantee of future results. RONTR_TRI_072012

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To Roth or Not To Roth?

A Roth IRA (Individual Retirement Account) is a special type of retirement plan that is a powerful, “tax advantaged” investment product. The number one benefit of the Roth IRA is that individuals are able to grow and withdraw their wealth tax free.

Source: RothIRA.com

That Is The Question.Am I Able To Convert My Assets From a Traditional IRA to a Roth IRA? YES

•Contributions are not tax deductible •Contributions are done on an after-tax basis•Contributions appreciate tax free•No limits as to how long you can make contributions•Income restrictions•No taxes are assessed on qualif ied withdrawals provided the account has been open for 5 years and the owner is 59 1/2 or older•Do not have a required minimum distribution at any age

Roth IRA Characteristics

Traditional IRA Characteristics

•Contributions are typically tax-deductible oMitigating factors include age, income and whether you are covered by an employer retirement plan•Contributions are usually done on a pre-tax basis•You can only contribute until you have reached age 70 ½. •No income restrictions though deductibility depends on several factors•When a distribution is made, all pre-tax contributions, dividends, interest and capital gains are taxed as ordinary income•Must start taking a required minimum distribution at age 70 ½

What Is A Roth Conversion?A Roth Conversion is a distribution of assets, either full or partial, from a Traditional IRA that is then transferred into a Roth IRA. The assets converted to a Roth IRA become designated as Roth IRA assets. A Roth Conversion is considered a taxable event and the account holder will generally owe ordinary income taxes in the current year.

Roth IRA Conversion Considerations- Ask yourself the following: •Taxes WhatwilltaxratesbewhenIneedmymoney? Traditional IRA distributions are taxed at your ordinary income rate. If you think you will be in a higher tax bracket in the future it may be advantageous to convert now and pay taxes while your in a lower income tax bracket.

Can you afford to pay the income taxes due from conversion from a source other than the IRA? It does not make sense to pay taxes from the IRA if you are not over 59 ½ because you will be penalized for the “distribution”.

Converted assets are considered taxable, so a conversion could push you into a higher tax bracket

What do you plan on doing with the money? Do you need the money in retirement? Do you intend to pass the money to your heirs?

•TimeHorizonYouneedtimetomaketheconversionpayoff, even assuming other considerations are favorable for conversion.

Do you have enough years until retirement to be able to recoup the dollars lost due to taxes on the conversion?

•RegulationAreyouconfidentthegovernmentwillnot change the rules of the game? Tax law and Roth tax leniency theoretically could change

THEBIGQUESTION?ShouldIConvert?

It is always prudent to seek the help from a qualif ied coach in making

decisions like this.

Roth IRA vs Taxable A ccount

Past performance is no guarantee of future results.

RONTR_TRI_072012