Thinking about a Roth Conversion ?

The Tax Increase Prevention and Reconciliation Act of 2006 (TIPRA) removed the income eligibility limit allowing all tax payers to convert assets in traditional retirement plans (IRA, SEP, 403b, 457b) to Roth IRAs. Roth IRA’s are an attractive estate planning tool for three reasons:

  1. Assets in Roth IRAs grow tax free.
  2. There is no ‘Required Minimum Distribution’ from a Roth IRA.
  3. Heirs don’t owe income tax on withdrawals from inherited Roth IRAs.

Taxpayers will have two options to pay the tax on any accumulated earnings and tax-deductible contributions when making the Roth conversion. Paying this tax isn’t a bad thing necessarily, as long as you can pay the tax out of non-IRA assets. Why? When you pay the conversion tax, you effectively prepay income taxes for your heirs without owing any gift tax or using up any of your valuable federal estate-tax exemption. Plus, prepaying the income taxes reduces the size of your taxable estate.

If you have question or would like to understand the implication of a Roth conversion to your tax, financial, or estate plan contact your tax advisor or Raffa Wealth Management directly.

If you have question or would like to understand the implication of a Roth conversion to your tax, financial, or estate plan contact your tax advisor or Raffa Wealth Management directly.

There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.
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