FINANCIAL CORNER -- IS ROTH IRA CONVERSION RIGHT FOR YOU?
By Lily M. Hazelton, CLU, ChFC, CFPR
吳美華 - October 16, 2009

The topic of Roth IRA conversion (“Roth conversion”) has been getting a lot of attention lately. The new Roth conversion rules, taking effect in 2010, will do away with the current restrictions that prevent many people from converting a traditional IRA to a Roth IRA. In addition, if you make a conversion in 2010, you will be able to report half of the income from the conversion on your 2011 tax return and the other half on your 2012 return.

The advantages of conversions, if certain conditions are met, include accumulating gains and taking distributions tax-free, and not being subject to required minimum distributions (RMDs). This may also be an efficient way to pass assets to heirs. However, there are situations where conversions may not be appropriate, one of which would be when one may have to pay a conversion tax at a higher rate than would have been paid if the funds were left in the traditional IRA and withdrawn later at a lower tax bracket.

Is a Roth conversion right for you? It depends on your income tax rate, whether your traditional IRA consists of any non-deductible contributions, the length of time you can leave the funds in the Roth IRA without taking withdrawals and how you will pay the income tax due at the time of the conversion.

The rules and process of Roth conversion can get rather complicated, especially if you have both deductible and non-deductible traditional IRAs. Please consult with your tax advisor before making a decision.

The information contained herein is not intended as a substitute for direct financial or legal advice. Securities America, Inc. does not provide tax advice. Please contact a tax or financial professional for further information.

Lily Hazelton, Registered Representative – CA Insurance License #0B13629
Securities offered through Securities America, Inc., a Registered Broker/Dealer, Member FINRA/SIPC
Advisory services offered through Securities America Advisors, Inc., an SEC Registered Investment Advisory Firm