AboutLouis Schwarz, QFP, CFP®, RFC®. ChFEBC Expertise Over 36 years experience - discretionary investment management, advisory service, stocks, bonds, mutual funds, annuities, IRA, Roth, 403(b), 401k, tax planning, tax preparation, retirement planning, tax reduction, life insurances. I hold five professional designations: QFP, CFP, RFC, ChFEBC, and Paladin Registered Advisor with a professional rating of five stars.
Experience First deaf Certified Financial Planner licensee (http://www.cfpboard.org/), General Securities Registered Representative (Series 7)(http://www/finra.org), Registered Financial Consultant (http://www.iarfc.org/), Registered Investment Advisor, Qualified Financial Planner (http://www.iaqfp.org/), Admitted to Paladin Registry of Personal Financial Advisors (http://www.paladinregistry.com/); Chartered Federal Employee Benefits Consultant (http://www.chfebc.com/); Licensed Life, Health, & Disability Agent
Organizations Financial Planning Association, International Association of Registered Financial Consultants, National Association of Deaf, Alexander G. Bell Association of the Deaf, National Deaf Business Institute
Education/Credentials Gallaudet University, College for Financial Planning
Awards and Honors Who's Who in Finance and Industry, Who's Who in the World, NAD Flying Fingers Award, MDAD Distinguished Award, MCAD Business of Year, Montgomery (MD) County Business Award, 2007 Outstanding Business Person of the Year, Gallaudet University Department of Business
Question Hi,
I am thinking of converting my traditional IRA to an existing Roth account. What do I need to consider and how do I figure my basis in my traditional IRA to figure my tax burden. I am 48, single and make under $100K AGI.
Also, is the Roth part of the Bush Tax Plan that will probably not exist after 2010?
Thank you so much!
Answer HI, Lisa
If you did make nondeductible IRA contributions, you should keep track of those contributions. Then subtract the contributions. The balance will be taxable when converted to Roth IRA.
So far there is no plan that Roth IRA will be discontinued.
To answer your first question, here is the part from my article:
There are some restrictions on conversions:
• Your modified adjusted gross income cannot exceed $100,000, whether single, or married and filing jointly.
• If you are married and filing separately, you are generally not eligible for a conversion regardless of income.
• If you convert and at the end of the year determine your income exceeds the $100,000 limit, you can reverse the conversion if completed by the due date of your tax return.
When you convert a traditional IRA to a Roth IRA, you must pay income tax on your deductible contributions and any earnings. However, since this is not a distribution, you do not have to pay a penalty if you follow the guidelines.
You can convert only a portion of your IRA assets, however you may not convert only your nondeductible contributions.
There are many good reasons to convert some or all of your traditional IRA assets to a Roth IRA, but it is not for everyone. Here are some things to consider:
Advantages • Conversion may make sense if you are a long way from retirement. You can't predict the tax rates or circumstances in the future, so it may make sense to prepare for the worst (higher tax rates) during your retirement.
• You may also consider a conversion if your IRA assets haven't grown significantly and the tax on their growth would be minimal.
• If you are certain you will be in the same or higher tax bracket after retirement, it might be easier to pay the taxes while you are still working.
Disadvantages • You may not want to convert traditional IRAs that have significant deductible contributions and earnings.
• If you believe you will be in a lower tax bracket during retirement, you will probably want to consider paying taxes then, rather than paying higher taxes now that would be due on conversion.
