To Roth or Not To Roth?

That Is The Question.

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.

Roth IRA vs Taxable A ccount

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

Source: RothIRA.com

Roth
IRA Characteristics

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

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 .
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

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 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.
Past performance is no guarantee of future results.

RONTR_TRI_072012

S a v e T h e I n v e s t o r. S a v e T h e W o r l d .
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