Roth IRA Conversion

Roth IRA Conversion

The rollover of assets from a SIMPLE plan, traditional IRA, or other retirement savings plan into a Roth IRA. A Roth IRA receives post-tax contributions and gives out tax-free distributions. This is a different structure from most retirement plans; because they are taxed differently, a Roth IRA conversion may be taxable.
References in periodicals archive ?
The TCJA eliminated a client's ability to recharacterize a Roth IRA conversion, which will mean that clients should engage in a much more careful analysis of whether converting to a Roth makes sense.
Such lookback reversals are permitted until October 15 of the year after a Roth IRA conversion.
However, a complete Roth IRA conversion of her $400,000 traditional IRA would add $400,000 to her taxable income this year and trigger a six-figure tax obligation.
The table does not take into account a Roth IRA conversion or whether a particular state taxes retirement income because those factors vary greatly.
Thus, a taxpayer can use a Roth IRA conversion to keep future income out of higher brackets and eliminate all future net investment income tax on IRA distributions.
This can be a very important advantage for a Roth IRA conversion, particularly if the plan to be converted holds volatile assets.
As discussed below, it seems unlikely under Florida law that a Roth IRA conversion would be deemed a fraudulent conversion of the RMDs, which would have otherwise been distributed from a traditional IRA; however, if it is, the fraudulent conversion rules could operate to expose all or part of the Roth IRA assets to the account holder's creditors.
The availability of the Roth IRA conversion has greatly enhanced the conversation about charitable intent and provides the opportunity for the advisor to separate from the traditional planning pack by leveraging the tax deductions against taxes owed.
Roth Revolution: Pay Taxes Once and Never Again (Morgan James), clearly helps readers understand the compelling advantages of making a Roth IRA conversion.
Remember, these traditional accounts would be subject to taxes sooner or later (through RMDs, at a Roth IRA conversion or when received by family members if there wasn't a Roth conversion).
In addition, the tax related to a Roth IRA conversion maybe deferred and paid ratably over two years in 2011 and 2012.