Roth IRA Conversions
The thought of paying the taxes associated with a Roth conversion have discouraged most high net worth individuals from taking advantage of the 'limited-time offer' - the waiver of Adjusted Gross Income limitations for Roth Conversions. But for those covered by a qualified employer retirement plan, the conversion decision may be worth a second look.
Assume an individual had $100,000 in an IRA account, $25,000 of which is a results of non-deductible contributions. If that individual chose to convert $25,000, IRS rules mandate $18,750 ({non-deductible basis / total IRA balance} times the conversion amount) be included in taxable income.
However, recent tax legislation allows for IRAs to be rolled into a 401(k) assuming the maximum amount rolled over does not exceed amounts that would be includible in gross income if not rolled over.
What does this mean? By rolling over all but the non-deductible basis into a qualified retirement plan, the same individual could complete a $25,000 conversion free of taxation.
Many factors need to be considered when employing this, or any other strategy, related to IRA conversions. But this is just one example of how the combined expertise of World Trend Financial and Terry Lockridge & Dunn can develop creative solutions designed to help you make intelligent tax and investment decisions.
Our professionals have the analytical tools ready to help determine if an IRA conversion works for you. Contact our office today to find out more.
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