What are the benefits of moving from a traditional IRA to a Roth IRA?
Benefits of Roth IRAs include: tax-free withdrawals in retirement (as long as they are qualified), no required minimum distributions, and the option to leave an income-tax-free legacy to the next generation. When considering a Roth IRA conversion, it is not a “one size fits all” approach as a variety of factors will need to be considered and
discussed with your tax professional.*
After we discuss your options with your tax professional, if you decide to convert assets from a traditional, SEP, SAR-SEP or SIMPLE IRA (only available after two years since the first contribution) into a Roth IRA (only available after two years since the first contribution) then we will need to complete the appropriate request form.
Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. Required Minimum Distributions (RMDs) may not be converted to a Roth IRA. The converted amount is generally subject to income taxation. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax-free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59.5 or prior to the account being opened for 5 years, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
Effective January 1, 2018, pursuant to the Tax Cuts and Jobs Act (Pub. L. No. 115- 97), a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA cannot be recharacterized. The new law also prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans, such as 401(k) or 403(b) plans. 10 2018/2019 Tax Season Guide | Investor Edition
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
For more information on Roth conversions please visit (https://www.irs.gov/pub/irspdf/p4530.pdf).
Retirement accounts can be extremely confusing in how and why it affects your tax situation the advisors at Wealthnest Tax Services are here to help you can contact our offices to schedule a complimentary tax review to see what retirement account would work best for your financial picture.