IRA Conversions To Roth Have Been Popular / Georgia

Congress dangled an incentive for high-income Americans to convert their tax-deferred individual retirement accounts into post-tax plans. Their response was overwhelming. Conversions from regular IRAs to Roth retirement accounts increased more than nine times in 2010, rising to $64.8 billion from $6.8 billion in 2009, according to data released [January 3rd] by the Internal Revenue Service. 

The results are in from no less than the IRS themselves. It seems taxpayers have investigated and found the Roth IRA to be an excellent tool for both retirement and estate planning. As reported in Bloomberg on the day of the IRS announcement, conversions from traditional to Roth IRAs increased by nine times in 2010. That was the first year of new laws surrounding the tool, pulling in over 10% of all millionaires with it. Indeed, these numbers mean a Roth IRA is food for thought, especially if you have yet to crunch the numbers for yourself.

For a bit of the history behind the IRS data, have a look at the original Bloomberg article titled "Tax Break for IRA Conversion Lured 10% of Millionaires." Roth IRAs are just another IRA in that it is an account earmarked for a retirement account. Interestingly, Roth IRAs work backwards by taxing at the time of deposit rather than at the time of withdrawal. That timing is the crucial difference.

In addition, since there is no deferred tax then there is no corresponding rush by the IRS to get you to access the account so they can tax it. As a result, there are no required minimum withdrawals for either you or your beneficiary. This makes it a useful retirement account to have at the ready and an incredibly convenient wealth transfer tool too!

With proper balancing there is much good to be found in Roth IRA accounts as part of your overall plan. While the law still allows, many can convert their traditional IRAs by paying the taxes due on those funds today, to secure both the remaining principal and all future appreciation tax-free.

One important insight from this article in particular, however, is a bit of hesitation over the future of the tool and the tax revenues to be gleaned by the federal government. The 10 year study conducted to support the law found increased revenues, which could only be expected since conversion means paying taxes today so you do not have to pay them 10 (or 50) years from now. What will happen in the future when there is no tax being paid on the appreciation? How will the Roth IRA fare then? Will the IRS try to find a way to tap into this retirement and wealth transfer tool at some point?

For more information about estate planning, please visit our website.

Reference: Bloomberg (January 3, 2013) "Tax Break for IRA Conversion Lured 10% of Millionaires"

No Comments

Leave a comment
Comment Information

Upcoming Workshops

3 Easy Steps To Protect Your "Stuff" This workshop addresses frequently asked questions and common misconceptions on Wills & Trusts, Asset Protection, Nursing Home Issues, and Medicaid Qualification.

Join Now! More Workshops

Call Us Today To Schedule A Consultation

We are ready to help you start planning. To schedule an initial consultation, call us at 770-822-2723 or 866-735-9628. You may also contact us online.

ESTATE PLANNING LAW GROUP OF GEORGIA,

Johns Creek Office
11555 Medlock Bridge Road, Suite 100
Johns Creek, GA 30097

Toll Free: 866-735-9628
Phone: 770-822-2723
Fax: 770-573-3379
Map & Directions

Lawrenceville Office
1755 North Brown Road, Suite 200
Lawrenceville, GA 30043

Toll Free: 866-735-9628
Phone: 770-822-2723
Fax: 770-573-3379
Map & Directions

map

How can we help you?

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close