Filed Under:Life Insurance, Life Planning Strategies

Minimizing IRS Impact With a Roth IRA Conversion

For many clients, converting from a traditional IRA to a Roth can save a considerable amount of money — and help leave a better legacy for the next generation.

Significant client discussions arose when it was announced IRA owners would have two years to pay the taxes due when converting traditional IRAs to Roth IRAs. Due to the market adjustments of the past few years and the ability to defer — or never take — required minimum distributions (RMDs) from Roth IRAs, there has been increased investor interest in Roth IRA concepts. Advisors would be wise to discuss this option with their clients because, as we’ll explore, the financial benefits can be significant.

When circumstances change

Time is running out!

Assuming the before-mentioned scenario, if the account was converted to a Roth IRA, my clients would no longer have to take RMDs, except for 2012. Why is this important? The timing of this recommendation can provide serious tax savings. Beginning in 2013, the prospect of new additional taxes will be a reality, and the 3.8% Medicare surtax would also be a factor in their other forms of income received.

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Nichole Morford

Nichole Morford
Managing Editor

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