Under the new rules, a Roth conversion would be available to anyone with a traditional 401(k) and an employer who offers a Roth account and conversion.
It is no doubt that the Roth IRA is a favorable option for people when it comes to retirement planning. After the Fiscal Ciff Deal, the Roth IRA gets increasingly more favorable for many people. How do you know whether it is right for you?
A recent CNN Money article entitled “More savers can convert to Roth 401(k)s under fiscal cliff deal” says it all. Nevertheless, there is more to a Roth IRA than meets the unaided eye.
Essentially, the Roth IRA reverses the normal IRA by requiring that you pay the income taxes on money deposited in the account up front when you deposit them instead of when you withdraw the money later. Also, in addition to no income taxes when withdrawn, with a Roth IRA you have no Required Minimum Distributions (RMDs) later on.
The Fiscal Cliff Deal allows for more people, as well as those with lower incomes, to convert their IRAs into Roth IRAs if they settle the tax burden up front. This can help with estate planning for their loved ones, too.
According to experts, however, a Roth IRA may not be right for some folks. A recent MarketWatch article entitled “Roth conversions easier, but are they right?” addresses this concern.
As with all things financial, as well as legal …look before you leap. This is especially true when it comes to tax law changes brought on by the Fiscal Cliff Deal.
For more information about retirement planning in Miami, Florida, please visit my estate planning Web site.