New 2013 Tax Act Offers Special Roth 401(k) Conversion Options Increasing Popularity of Solo 401(k) Plan, According to IRA Financial Group Tax Attorney

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American Tax Relief Act of 2013 now allows 401(k) Plan Roth conversions without a Triggering Event.

2013 Tax Act - 401(k) Plan Roth Conversion

The general intent of the Roth 401(k) conversion rule is too encourage investors to roll over 401(k) plans into Roth individual retirement accounts or Roth 401(k) Plans and, thereby, pay tax on the amount of the conversion

On January 1, Congress passed the American Tax Relief Act (the “Act”) and less than twenty-four hours later, President Obama signed the bill into law which provides some permanent tax changes, including modifying the 401(k) Plan Roth conversion rules. Under the new Act, workers with 401(k)s, 403(b)s and similar defined contribution plans would be able to convert to a Roth IRA at any time without any type of plan triggering event. Whereas, under the prior conversion rules, the 401(k) Plan participant was required to have a “triggering event” in order to convert pre-tax 401(K) Plan funds to a Roth IRA or a Roth 401(k) sub-account. “The general intent of the Roth Solo 401k conversion rule is too encourage investors to roll over 401(k) plans into Roth individual retirement accounts or Roth 401(k) Plans and, thereby, pay tax on the amount of the conversion, “ stated Adam Bergman, a tax attorney with the IRA Financial Group. “The impetus behind the new Roth 401(k) conversion rules is clearly to help raise tax revenues,“ stated Mr. Bergman. The change is projected to raise $12.2 billion in revenue over 10 years, according to the Joint Committee on Taxation, and help defray the cost of delaying spending cuts that had been set to take effect this month.

Currently, 401(k) plan participants can only roll their money into a Roth IRA or a Roth 401(k) Plan sub-account, if offered by the employer 401(k) Plan, after three qualifying events: changing jobs, retirement, or reaching age 59 and 1/2. But under the Act, workers with 401(k)s, 403(b)s and similar defined contribution plans would be able to convert to a Roth IRA or Roth 401(k) plan sub-account, if offered, at any time. “Lawmakers clearly believe that easing restrictions on the conversions will produce federal funds because participants must pay tax on the money when doing the Roth conversion,“ stated Mr. Bergman. The advantage of having a Roth IRA or Roth 401(k) Plan account is that once the Roth IRA holder or plan participant reaches the age of 591/2 and a Roth account has been opened at least five years, all income and appreciation generated by the Roth account would be tax-free. In contrast, a regular 401(k) is funded with pretax money and you pay the tax when you withdraw the money.

Conversions to Roth 401(k)s had been generally restricted to certain funds and to plans that allowed the switches. The new law unlocks the opportunity to more workers who hold $5 trillion in employer-sponsored defined contribution plans including 401(k)s. IRA Financial Group’s Solo 401(k) Plan allows plan participants to establish a Roth after-tax account.

IRA Financial Group’s Roth Solo 401K Plan is the ultimate tax-free retirement solution for the self-employed. With federal and state income tax rates expected to increase in the future, gaining the ability to generate tax-free returns from your retirement investments when you retire is the last surviving legal tax shelter. With a Roth Solo 401K, the Solo 401K plan participant can make almost any investment tax-free, including real estate, tax liens, precious metals, currencies, options, and private business investments and once the plan participant reaches the age of 59 ½, he or she will be able to live off the Roth 401K assets without ever paying tax. “With a Roth 401K, an individual can live off the Roth 401K investment income tax-free or take a portion of his or her Roth 401K funds and use it for any purpose without ever paying tax,“ stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate tax-free and without custodian consent!

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Jaclyn Baily
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