If you are considering converting a traditional IRA rollover to a Roth account, there are many different things to consider. So, let's get right to it.
Under the current tax code, your annual earning must be less than $100,000. That's your modified adjusted gross income. Details for figuring that amount are found in IRS form 8606. If you find that you do not qualify this year, don't be overly distressed. That limitation will be lifted in 2010, unless amendments to the law are made before that time. Congress can change the laws regarding retirement accounts at any time and that's one of the disadvantages of the Roth.
Currently, people see the advantage of converting an IRA rollover to a Roth as tax-free distributions. But, if the tax laws were to change, you might not see that benefit. You might also die before you begin taking distributions, so again, you would not see the benefit. We all hope to live to see retirement age and we all hope to be wealthy when we get there. I suppose it really depends on how "hopeful" you are.
Another advantage that people see in converting an IRA rollover to a Roth is that the account is more like a traditional savings account. Once a five year seasoning period has passed, converted amounts and other contributions may be withdrawn at any time, without incurring taxes. Earnings on the converted amount may not be withdrawn until one passes the age of 59 ½ without incurring taxes.
In a traditional account, any funds that are withdrawn before the age of retirement are subject to taxation. Interest and return on investments are, of course, not subject to taxation in either account. For those who make real estate investments, there are no capital gains taxes, as long as the investments can be made entirely with the funds in the account and do not require financing. Financing investments will cause you to incur UBIT or unrelated business income tax on profits and earnings.
If you have decided that an IRA rollover to a Roth is the right choice for you, you might want to think about self-directed investing. Your potential profits are much greater. Only about 5% of all account owners choose this option, but our numbers are growing, because we do not have to rely on the volatile stock market to fund our future.
I have read too many sad stories lately about couples that are well past 60, but cannot afford to retire. Who are their investment advisors? There are always options. If nothing else, they could take the lump sum and convert it to an annuity that would pay them their regular salary for the rest of their lives, regardless of how long or short that might be.
There are a number of investment types, including real estate and annuities that might make more sense than what you are doing now. If it is time to convert an IRA rollover to a Roth, then it's time you learned about your options.
Under the current tax code, your annual earning must be less than $100,000. That's your modified adjusted gross income. Details for figuring that amount are found in IRS form 8606. If you find that you do not qualify this year, don't be overly distressed. That limitation will be lifted in 2010, unless amendments to the law are made before that time. Congress can change the laws regarding retirement accounts at any time and that's one of the disadvantages of the Roth.
Currently, people see the advantage of converting an IRA rollover to a Roth as tax-free distributions. But, if the tax laws were to change, you might not see that benefit. You might also die before you begin taking distributions, so again, you would not see the benefit. We all hope to live to see retirement age and we all hope to be wealthy when we get there. I suppose it really depends on how "hopeful" you are.
Another advantage that people see in converting an IRA rollover to a Roth is that the account is more like a traditional savings account. Once a five year seasoning period has passed, converted amounts and other contributions may be withdrawn at any time, without incurring taxes. Earnings on the converted amount may not be withdrawn until one passes the age of 59 ½ without incurring taxes.
In a traditional account, any funds that are withdrawn before the age of retirement are subject to taxation. Interest and return on investments are, of course, not subject to taxation in either account. For those who make real estate investments, there are no capital gains taxes, as long as the investments can be made entirely with the funds in the account and do not require financing. Financing investments will cause you to incur UBIT or unrelated business income tax on profits and earnings.
If you have decided that an IRA rollover to a Roth is the right choice for you, you might want to think about self-directed investing. Your potential profits are much greater. Only about 5% of all account owners choose this option, but our numbers are growing, because we do not have to rely on the volatile stock market to fund our future.
I have read too many sad stories lately about couples that are well past 60, but cannot afford to retire. Who are their investment advisors? There are always options. If nothing else, they could take the lump sum and convert it to an annuity that would pay them their regular salary for the rest of their lives, regardless of how long or short that might be.
There are a number of investment types, including real estate and annuities that might make more sense than what you are doing now. If it is time to convert an IRA rollover to a Roth, then it's time you learned about your options.
Judy Pratt is focused on showing you how to successfully earn money for your future with real estate investing using honest and ethical turn-key methods while minimizing any risk. To get your FREE ebook and find out more about socially conscious investing please go to http://www.boost-your-ira.com
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