Forever To Never Retirement Accounts

Does never paying income tax on your retirement income sound too good to be true?  Well believe it, because on or after January 4, 2010, anyone can convert their traditional IRA to a Roth IRA, pay the taxes in 2 installments in October 2011 and October 2012 and never again pay income tax on any amount ever withdrawn from the account.

Should you do it?  Kiplinger’s explains the benefits of the Roth IRA.  With stocks down from historical highs and tax rates at all time historical lows, now is the best time to convert to this long term investment strategy.  Read Kiplinger’s explanation of when to switch.

Before 2010, high earners were prohibited from establishing or converting to a Roth account, but no more.  And for 1 year only, the tax can be paid in 2 installments, stretching the due date on half of the taxes due until the extended due date of their 2011 tax return!

But wait, there’s more information that hasn’t been widely disseminated!  If the value of the account goes down before the extended due date on the 2010 return, you can reconvert back to a traditional IRA, pay no tax until the money is withdrawn and then convert the lower amount back to a Roth account the following year.

If you believe the value of the stretch out over your lifetime outweighs the benefit of paying the tax over 2 years, 22 and 34 months after you’ve converted, think about this – If your tax and financial advisors haven’t told you (1) about this opportunity and that (2) income taxes are at an all time historically low rate and headed nowhere but up, you should ask.

Because of the unique features of Roth IRAs, no minimum required distributions during your lifetime, MRD for your beneficiary, no taxes on any of the money withdrawn from the account, you have a once in a lifetime opportunity to make a tax decision that will benefit you, your spouse, and your descendants by protecting your nest egg from ever being subject to income tax again.  And by paying the tax in advance at the lowest historical rates, you are also reducing potential estate taxes.

With all of these benefits, shouldn’t you at least be considering a Roth IRA?

2017-12-01T16:26:41+00:00 By |Retirement Planning, Tax News|Comments Off on Forever To Never Retirement Accounts

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