| I don't know of too many people that were | | | | may never make another cent off of this thing, |
| happy watching their investments "tank" along | | | | he wants to get his "licks" in while he still can. |
| with the financial markets. Heck, some close | | | | Whenever the investment markets are real high |
| friends of mine didn't even look at any of their | | | | like they were a few years ago it would cost |
| mutual fund/brokerage statements for the past | | | | more money in taxes to convert an IRA. For |
| few months. They went from the mailbox to the | | | | example if your IRA was worth $100,000 in 2006, |
| "circular file," and while I didn't go that far | | | | it would cost a little over $20,000 to convert an |
| personally, reading the "red ink" didn't exactly | | | | IRA to a Roth IRA if you are in the 25% tax |
| make me jump for joy either. | | | | bracket and your income for the year, including |
| At Halas Consulting, we don't just focus on our | | | | the conversion was about $77,000 (note: this |
| clients' investments, we also focus on risk | | | | number is a rough estimate of the tax liability, it |
| management, and tax planning and preparation, | | | | doesn't take into account any extraordinary |
| and it's on the tax planning side that we | | | | factors that may be present in your individual tax |
| discovered the huge opportunity that an IRA | | | | situation.) |
| owner can take advantage of if he/she is a long | | | | If however, you decided to convert your |
| term thinker. | | | | traditional IRA to a Roth IRA in the 2008 tax |
| As much as I like Traditional IRAs, I absolutely | | | | year, and your $100,000 IRA is now worth |
| LOVE Roth IRAs; after all how could I not? Who | | | | $65,930 because it was invested in the S&P |
| wouldn't like totally tax free money at retirement, | | | | 500 Index, which was down 34.07% as of the |
| or even after just 5 years from when you | | | | end of October 2008, your tax liability would be |
| opened the account if you happen to be older | | | | about $13,449.72 figuring everything else |
| than 59 1/2 at that time? If you're under 59 1/2 | | | | remained the same. Maybe that's still a bit too |
| you can take your money out without tax liability | | | | much for you, but would you be in favor of |
| up to the amount you invested, you have to wait | | | | converting half of your Traditional IRA to a Roth |
| till you're 59 1/2 to take out the growth amount. | | | | IRA? If so, a $32,965 conversion (half of |
| Once you reach age 70 1/2 you MUST start | | | | $65,930) would cost you about $6724.86 in taxes. |
| taking required minimum distributions (RMDs) from | | | | When the market goes back up again, and it |
| a Traditional IRA, whether you need them or not. | | | | always has historically, you'll then have the |
| This isn't the case with a Roth IRA, you can take | | | | amount that you started with (or more) AND |
| money out if you wish, or if you want to leave | | | | you'll potentially NEVER have to pay taxes on that |
| the money in to grow because you decided to | | | | money again, nor will the government be able to |
| work a few more years, go right ahead. In short, | | | | tell you that you have to take a certain amount |
| if you like flexibility AND saving money on a tax | | | | every year after you turn age 70 1/2! |
| advantaged basis, a Roth IRA is hard to beat. | | | | If this idea is of interest to you, I recommend |
| Now, you may be wondering, what does the | | | | doing it, or discussing the idea with your tax or |
| aforementioned Roth IRA discussion have to do | | | | financial advisor as soon as possible. April 14, 2009 |
| with the crappy investment markets that we've | | | | is NOT the time that you want to implement the |
| been having lately? I'm glad you asked. You see, | | | | process as then it will be too late. If you like the |
| when I have clients that have IRAs, one of the | | | | idea but don't feel confident doing it yourself, and |
| first things I like to do is find out how we can | | | | don't currently have a financial advisor, feel free |
| convert those rascals to Roth IRAs as soon as | | | | to contact me at the email address listed below |
| possible. The only "bug" in this particular soup is | | | | and we can explore the possibility further and see |
| that there is a tax liability to the IRA owner if he | | | | if it makes sense for you. |
| she converts to a Roth IRA. Since Uncle Sam | | | | |