Thursday, November 12, 2009

Roth IRAs

Did you know that on January 1, 2010 the Roth IRA conversion rules are changing? For one year only, people who make over $100,000 may convert their traditional IRA’s into a Roth IRA. (See an example in Advisor Today.) People under that threshold may convert at any time!

Why Consider a Roth:

1. There are no required minimum distributions in a Roth.
2. Assets in a Roth grow tax free, not tax deferred.
3. Beneficiaries can inherit the accounts tax free, and also start a “stretch Roth” to provide tax-free cash flow for life.

If you plan on using your IRA funds soon (within 10 years), or you expect to spend all of your IRA funds during your lifetime, the conversion may not be right for you. When you convert to a Roth, you have to pay the taxes on the money at that time. However, if you convert during 2010, you will be allowed to stretch the tax payments over 2 years.

To find out if a Roth is right for you, ask at least these 3 questions:

1. Do you believe taxes will be higher or lower for you in the future?
2. Do you plan on growing your retirement account for at least 10 years?
3. Do you want to avoid required minimum distributions so you can accumulate your money longer?

If you answered “yes” to the 3 questions, a Roth conversion may be right for you.

To find out what to put in your Roth that will have potential for growth without any chance of loss, click on the button to the right to consult with me today.

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