SILKIN MANAGEMENT GROUP: MORE IDEAS ON 2010 TAX PLANNING

Part 6
Should You Convert Your IRA Into a Roth IRA?

Silkin Management Group’s continuing tax planning series that exists on our various Silkin Management Group blog sites continues today with some ideas about IRAs and Roth IRAs. As stated before, Silkin Management Group is a practice management company, not a tax firm and we do not and cannot recommend specific tax advice. But we also try to keep Silkin Management Group clients informed of relevant information that can affect their financial decisions and do so by presenting information from our accounting firm, Carl Foster, LLC.

If you have an IRA and its worth has gone way down, you may be interested in this information.

CONVERT TRADITIONAL IRA INTO ROTH IRA

If your traditional IRA has dropped in value and you expect to pay higher federal income tax rates in future years, now might be a very good time to consider converting all or part of your traditional IRA balance into a Roth IRA. Here’s why.

If you convert, it will trigger a current tax hit on the amount you convert, it will trigger a current tax hit on the amount you convert. But, with your traditional IRA balance at depressed levels (and possibly your overall income too), the tax hit will be less. After the conversion, all the income and gains that accumulate in your Roth IRA, and all withdrawals after you reach age 59 ½, will be totally free of any federal taxes – assuming you meet the tax free withdrawal rules. In contrast, future withdrawals from a traditional IRA could be hit with tax rates that are higher than today’s rates – maybe much higher depending on how things go.

In tomorrow’s Silkin Management Group blog article, we’ll present more information for you to consider on this concept.

If you’d like more information about Silkin Management Group, contact us at 800-695-0257.

Jack Hennessy
Silkin Management Group Consultant