Portland, OR (PRWEB) May 28, 2010
A Roth IRA conversion is advantageous to those who want to pass tax-exempt investments on to the next generation. Individuals who convert to a Roth IRA in 2010 spread their tax liability out across two years and pay in 2011 and 2012. "This reduces some of the immediate tax hit by paying half the income tax in 2011 and the other half in 2012 at whatever tax bracket they are in during those years," explains Marilyn Bergen, a fee-only Certified Financial Planner with CMC Advisers. "The Roth IRA offers some generous estate-planning benefits," Bergen reports. When a traditional IRA or 401(k) is passed on to a beneficiary, the heir pays taxes on whatever is left in the account based on their own tax bracket--which could end up being a sizable amount. With a Roth IRA, the beneficiary acquires the account without having to pay taxes on the remainder.
In addition, those who convert from a traditional to a Roth IRA can make tax-free withdrawals once they hit age 59 ½ (if they have held the account for at least five years). Under the assumption that income tax rates increase in the future, this may have huge appeal; being able to withdraw Roth IRA funds and pay no income taxes. By doing so investors could pay at the now lower rates and withdraw later when rates are higher, without regard to the income tax liability when withdrawing.
People considering a conversion should have the funds accessible to pay the taxes. It is not recommended that the tax liability come from the IRA that is being converted. One of the most compelling reasons to make the conversion is for savers who intend to pass the account to their heirs. Tax rates and account withdrawals are among a few other benefits to consider. "There is a general consensus that taxes might rise, although no one knows how much," Bergen explains. The Roth IRA does not require minimum withdrawals, so the entire amount could be left untouched for heirs. By contrast, traditional IRAs require minimum withdrawals starting at age 70 ½.
While Roth conversions have many benefits it is recommended that those considering such a conversion get objective advice from a knowledgeable financial advisor or tax consultant. Seeking advice from a fee-only advisor eliminates conflicts of interest.
Marilyn Bergen, CFP has been successfully serving clients in the financial services industry since 1982. Her background and experience form a solid base to assist clients in planning a secure financial future.
Ms. Bergen is a past president of the Oregon Society of the Institute of Certified Financial Planners. She has served on the Pass Score Committee for the CFP Board of Standards. Other memberships and affiliations include the Estate Planning Council of Portland and the Financial Planning Association. Ms. Bergen is also past president of Network of Business and Professional Women.
The October 1996 issue of Worth magazine listed Ms. Bergen as one of the top 200 financial advisers in the country. Worth magazine listed her again in the October 1997, September 1998, October 1999, September 2001 and the July/August 2002 issues as one of the top financial advisers in the country. The July 1998, November 1999, August 2000, December 2002 and November 2004 issues of Medical Economics named Ms. Bergen as one of "The 150 Best Financial Advisers For Doctors."
For further information visit http://www.cmcadvisers.com
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