Roth IRA Conversion

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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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Recent rules regarding Roth IRAs allow taxpayers to recharacterize a Roth conversion and later reconvert back to a Roth IRA.
First, the heirs will have $1.1 million more if the parent does the Roth conversion. Second, they will have the money in a Roth IRA, where it will never be subject to the increased tax rates, higher capital gains rates and lack of dividend qualification.
Other than the chance that tax rates for a given taxpayer may be lower at distribution than at Roth conversion, the only downside is the fact that a taxpayer between 54 h.
Jeremy Portnoff, a financial advisor with Portnoff Financial LLC, Westfield, N.J., says that a Roth conversion makes sense for those who do not need to take RMDs but are forced to take distributions.
YOU MAY ALREADY be aware that congress is ready to give away the farm at least as it relates to the Roth conversion. As a result, there has never been a better time to look at utilizing the Roth IRA as both a retirement and estate-planning tool.
The IRS has reported that some people converted to Roth IRAs even though their income exceeded the $100,000 limit or they otherwise did not qualify for the Roth conversion.
Because a Roth conversion is subject to income taxation, this solution provides a source of liquidity to pay the taxes.
Taxpayers who do a traditional to Roth conversion in 1998 will be permitted to make an election to include the entire conversion income in their 1998 taxable income, rather than taking it into account ratably over four years.
A "backdoor" Roth IRA contribution, at its simplest, involves making a contribution to a traditional IRA using after-tax dollars and then performing an immediate tax-free Roth conversion. In 2010, income limits on Roth IRA conversions were removed, opening the backdoor for Roth IRA contributions by investors at any income level.
If estimated income tax payments are not required due to a business loss, a Roth conversion should be discussed to take advantage of such loss.
Summary paragraph: Roth conversion eligibility; deferring time-off pay to a 457 plan; union-to-nonunion benefits eligibility; ERISA church plan?
This article addresses when and why a Roth account makes good sense, as well as best practices in the Roth conversion process.