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.
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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.
In addition, the tax related to a Roth IRA conversion maybe deferred and paid ratably over two years in 2011 and 2012.
If you pay tax as "married, filing separately," you are ineligible for a Roth IRA conversion, no matter what your income.
If you fit any of the following profiles, a traditional to Roth IRA conversion might be worth considering:
Additionally, Roth IRA conversion activity in 20124 continues to be double the level seen in 2009 - before income limits were removed.
Heirs can even withdraw earnings tax-free regardless of their age or the age of the deceased account owner, as long as the Roth IRA conversion assets have existed for at least five years.
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.