| Roth Conversions Can Help Build Wealth (2007-11-05) |
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marotta
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| Roth Conversions Can Help Build Wealth (2007-11-05) |
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Roth Conversions Can Help Build Wealth (2007-11-05)
by David John Marotta and Beth Anderson Nedelisky
If you don't have retirement savings in Roth IRAs, it's time you considered the benefit of these tax-savings accounts. These so called "Roth conversions" can be performed on traditional IRAs. And, beginning in 2008, it will be easier to roll money from an employer plan into a Roth IRA.
Read the complete column at http://www.emarotta.com/article.php?ID=255
David John Marotta
Marotta Asset Management, Inc.
Fee-only Financial Planning
http://www.emarotta.com
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Mon Nov 05, 2007 5:10 pm |
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efflandt
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Cash: $ 80.45
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Joined: 25 Apr 2005
Location: Elgin, IL USA
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One other note is that you should try to pay the tax for conversion by means other than money from the IRA. If tax is withheld from the conversion you would owe tax and 10% penalty on the withheld amount.
The most effective way to do a IRA to Roth IRA conversion is at an annual rate that does not raise your marginal tax bracket. So I adjusted my W-4 in 2006 (less exemptions) for enough additional withholding to cover $10,000/yr conversions, and specifically tell my trustee NOT to withhold tax from the conversions. 401(k) contributions also keep my taxable wages under the next tax bracket.
In 2010 more people (with higher income) will be eligible to convert and spread the tax over 2011 and 2012.
A pleasant surprise when I did my 2006 taxes is that Illinois does not tax retirement distributions, so there is no state tax on my IRA to Roth conversions.
Although, I may retire in 6 to 11 years, the Roth IRA can continue to grow tax free until I need it later on for inflation. There is never a required minimum distribution from a Roth IRA (except by a beneficiary after death).
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Fri Nov 09, 2007 2:59 am |
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