A Roth Conversion often makes sense for retirees in the 15% tax bracket (or lower), or self-employed individuals who may experience lower earnings or even a loss in 2013. The strategy is to “top up” the income tax bracket, using all of the potentially unused portion.
We recommend you check with your accountant to see if a Roth conversion makes sense for you.
Please let us know no later than December 15th if you want to do a Roth conversion.
Here are some additional points to keep in mind when converting a portion of a traditional IRA to a Roth IRA.
- The amount of the conversion counts as ordinary income on your tax return.
- To get the most benefit from the conversion, it is important to pay the income tax from a separate source instead of having it withheld from the conversion funds.
- The benefit of a Roth conversion is that the money in the Roth will not be taxed when it is distributed.
- Roth IRAs do not have annual required minimum distributions like traditional IRAs do.
- For these reasons, Roth IRAs are nicely suited for passing on to children or grandchildren.