Roth IRA Conversion Opportunity
An Open Road for Retirement Opportunity
A number of financial vehicles can help you save for retirement, including popular choices like 401(k), SEP or traditional IRA plans. Another type, the Roth IRA, may be an ideal retirement savings vehicle for you. After all, it has features that allow you to:
- potentially grow money for retirement
- take retirement withdrawals tax free, after age 59½ and a Roth account has been established for 5 years; Roth IRA participants pay current income tax rates on any contributions/conversions to the account, and must have held a Roth IRA account for five years and waited until age 59½ before taking withdrawals
- no taxes paid on earnings or principal after five years and age 59½
- pass assets to your beneficiaries free of federal income tax1
- make contributions after age 70½, with earned income and when meeting contribution qualifications
- avoid required minimum distributions(RMDs) at 70½
In the past, you may not have qualified for a Roth IRA conversion, especially if:
- your modified adjusted gross income (MAGI) was over $100,000
- you are married, but file separate tax returns
That changed.
The Opportunity Ahead
Beginning in 2010, traditional IRAs or other qualified retirement plans may be converted to Roth IRAs. While you are required to pay income taxes on the amount converted, qualifying future withdrawals from your Roth IRA are income tax free. The Tax Increase Prevention and Reconciliation Act (TIPRA):
- lifted the income limit for Roth IRA conversions
- allowed married couples who file separately to convert to a Roth IRA
Is Switching Vehicles for You?
Ask yourself these questions to determine if you might benefit from converting a traditional IRA, or other qualified retirement plans, to a Roth IRA.
If you answered yes to any of these questions, a Roth IRA may be the right retirement savings vehicle for you. Careful consideration should be made before you convert a traditional IRA to a Roth IRA as significant tax consequences will occur. Please consult your attorney or tax advisor to understand how a conversion will affect your federal income tax bill, state income taxes and your Adjusted Gross Income.
U-turns Allowed - Changing Your Mind
Another unique feature to this Roth IRA opportunity is the ability to change your mind after you convert to a Roth IRA. You can make a U-turn with what is known as a Roth Recharacterization, allowing you to revoke your Roth conversion and change back to a traditional IRA. Recharacterization is a complex process and many factors need to be considered in your decision making. The deadline for recharacterization is the due date of your tax return for the year of the original conversion, including extensions. (If you follow a special procedure, you can obtain an extended due date even if you filed your tax return without an extension.)
It isn"t enough for you to take action within your tax filing due date. The insurer has to complete the recharacterization before your tax filing deadline. It's best to take action well in advance of your tax filing due date so there's time to follow up and confirm that the recharacterization has been completed and reported appropriately.
The information presented here is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Western & Southern Financial Group recommends consultation with a qualified tax advisor. Western & Southern Financial Group member companies and their representatives do not offer tax advice.
Contact your financial professional to learn more about converting your traditional IRA into a Roth IRA.
Roth IRA Conversion Calculator Now Available
Use this tool to determine whether a conversion from a traditional IRA to a Roth IRA might be good for you. Simply input your data and quickly see the results.
1 Beneficiaries must take required minimum distributions.
Payment of benefits under the annuity contract is the obligation of, and is guaranteed by, the insurance company issuing the annuity. Guarantees are based on the claims-paying ability of the insurer. Investment return and principal value of an investment will fluctuate so units, when redeemed, may be worth more or less than their original cost.
Annuities are issued and guaranteed by Western-Southern Life Assurance Company, Cincinnati, OH, Integrity Life Insurance Company, Cincinnati, OH and National Integrity Life Insurance Company, Goshen, NY. Variable annuities are distributed by Touchstone Securities, Inc.,* Cincinnati, OH. All are members of Western & Southern Financial Group. Integrity operates in all states and DC except ME, NH, NY and VT, where National Integrity operates. Western & Southern Life operates in all states and DC except AK, ME, NH, NY and RI. W&S Financial Group Distributors, Inc., is an affiliated agency of the insurers, which have sole financial responsibility for their products. Product availability and features vary by state.
Western & Southern Financial Group member companies do not offer tax advice. For specific tax information, consult your attorney or tax advisor. You do not have to purchase an annuity contract to fund an IRA or to benefit from a traditional IRA to Roth IRA conversion.
* A registered broker-dealer and member FINRA/ SIPC.
No bank guarantee.
Not a deposit.
May lose value.
Not FDIC/NCUA insured.
Not insured by any federal government agency.
