bates insurance group is an independent insurance agency in edina minnesota logo

For All Your Insurance Needs...Think BIG!

952-944-5044

Toll Free: 800-728-8745

To convert or not to convert - that is the question.  OK, not really.  But it has become quite a hyped-up topic for 2010.  The reason for this is two-fold: 1) - Tax Rules:   the government has changed some, and temporarily lifted some other tax rules associated with converting;  2) - Tax Rates:  the main motivation for converting is tax rates - with the general belief that tax rates will predominantly be going up over the next foreseeable future.

So, you can see the theme here is all about taxes!   UGH - not Taxes!  If you are going to talk about taxes, you know it can get complicated.  After all, the present tax code is over 67,000 pages long, while the average bible is somewhere around 1300.   Can I possibly summarize this topic in this newsletter - not even close.   So before I say anything, I'm going to suggest you consult with your tax advisor over this topic if you have questions.

In short, ROTH IRA conversions are simply a process of converting all or some of your traditional IRA (or pre-tax retirement accounts) assets to that of at ROTH IRA.   This option is not new, but like income limits that can restrict ROTH IRA contributions, the option to convert has always had income limit restrictions associated with it.  2010 temporarily lifts the income restrictions - making this option available to anyone.   Yet, while  the restrictions are lifted, the tax liability associated with this transaction is not.  Every dollar  converted gets counted in your income for tax filing purposes, and herein lies the preverbal "devil is in the details" decision for folks.

In the end, if you make over six figures a year, then 2010 changes your options with respect to this topic.  However, whether or not you should proceed requires knowing much more than the simple eligibility rules - which is what the hype focuses on.  Also, converting may or may not make sense in any income range, yet in my opinion, should be part of everyone's  retirement and tax planning strategy.  So, if you don't want to learn it yourself, then seek some help, but at least remember to ask about it.

Pete Thoresen


If converting a Traditional IRA to a ROTH IRA, you will owe ordinary income taxes on any previously deducted Traditional IRA contributions and all earnings.  A conversion may place you in a higher tax bracket than you are in now.  Because Roth IRA conversions may not be appropriate for all investors, and individual situations vary we suggest that you discuss tax issues with a qualified tax advisor.
Securities offered through Royal Alliance Associates Inc., member FINRA/SIPC. Investment advisory services offered through Focus Financial Network, Inc., a registered investment advisor not affiliated with Royal Alliance Associates, Inc.  /  1000 Shelard Parkway, Suite 300, Minneapolis, MN  55426

 

 

Contact BIG

Use this form to ask us a question. We will get back to you shortly.

captcha