Today we will hear from Irene Smith, a Certified Divorce Financial Analyst and an affiliate of The Law Collaborative. Irene is a member of the Institute of Divorce Financial Analysts and the Los Angeles Collaborative Family Law Association. She served on the board of the American Women Society of Certified Public Accounts – Los Angeles Chapter, and was the scholarship committee chairperson for the Chapter. She is a frequent speaker on the subjects of financial planning, risk management and financial fitness strategies for women. She holds the designations of Certified Divorce Financial Analyst™, Certified Financial Planner® and Certified Public Accountant. You can visit Irene’s website at www.SmithFinancialManagement.com.
Sincerely,
Ron and Robert
Roth IRA Conversion Strategies
Traditional IRAs offer some great advantages, such as tax-deductible contributions and tax-deferred growth. However, with tax-free growth of earnings, tax-free qualified withdrawals and no required minimum distributions for original account owners, Roth IRAs offer remarkable benefits.
Beginning in 2010, the modified adjusted gross income limit for ROTH IRA conversions no longer applies. To help relieve tax liabilities on IRA conversions, investors who convert in 2010 have the unique opportunity to pay the taxes on conversion with their 2010 income tax return or elect to pay the taxes over the following two years, 2011 and 2012.
If no withdrawal is needed from a retirement account, Roth IRA conversion can transform the account from a retirement vehicle to a wealth transfer tool. Since there are no required minimum distributions (RMD) with Roth IRAs, the account can continue to grow tax free throughout your retirement. Eventually, you can pass it on to your beneficiaries, giving them growth potential and tax-free access to this portion of their inheritance. They will need to take RMDs, but the RMDs will be income tax-free.
Another strategy may apply if you have experienced a loss in the value of your qualified retirement plan or traditional IRA. You could convert the account to a Roth IRA while the markets are down, and pay taxes with non-retirement funds. As the markets recover, the recovered investment loss and any additional investment growth would be tax free, as would any qualified distributions you choose to take in retirement.
Now is the time to talk to your tax and financial advisor to formulate a game plan.
Irene Smith
To contact Irene, email her at Irene.Smith@InvestmentCenters.com
