ROTH-IRA CONVERSIONS

What is a Roth-IRA?

A retirement account that creates a Tax Free Income for participants and beneficiaries.

How does a Roth-IRA compare to a Traditional IRA? (pdf)

Two Types of Roth-IRAs (pdf)

1. Annual Contributions

• Roth-IRA
• Roth-401(k)/Roth-403(b

2. Conversion from IRA, SEP-IRA, Simple-IRA (after 2 year hold), 401(k) to
Roth-IRA

Caution: Simple-IRA's opened less than two years are not eligible
               for a Roth-Conversion and are subject to a 25% penalty
               tax.

Current Owner	IRA	Qualified Plans*
Original Owner	Yes	Yes
Inherited by Spouse	Yes	Yes
Inherited by Non-spouse	No	Yes
		*if plan allows

What's New in 2010?

• Now anyone can do a Roth conversion
  - The $100,000 MAGI income limit permanently repealed.
  - Married individuals filing separately will be able to do a Roth conversion.
  
  
• Option to pay income taxes in 2010 or spread the taxable income on the conversion amount equally over 2011 and 2012.

ROTH-IRA Conversions

• Benefits for conversion (pdf)
  
  
• Who should not convert (pdf)
  
  
• Qualified Distributions - free of all tax & penalty (pdf)
  
  
• Ordering Rules for distributions (pdf)
  
  
• Roth-IRA Five-Year Rules - You Can Have More Than One (pdf)
  
  
• Pro-Rata Rule for IRAs, SEP-IRAs and Simple IRAs.
  If you have after-tax contributions in an IRA, the IRS looks at the balance of all your IRAs in calculating the percentage of after-tax dollars converted, if only one of several IRAs are converted.
  
  Caution: Age 70 1/2 Required Minimum Distribution must be taken before converting to a Roth-IRA

For a Roth-IRA Conversion analysis or questions email Harry Rubins.

 

 

General information only - review with your tax advisor before taking action.