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’s no doubt that the Roth IRA
is a favorable option to many people when it comes to retirement planning. And after the fiscal cliff deal, the Roth IRA
just keeps getting better and better for more and more people. How do you know whether
it is right for you?
A recent CNN Money article titled “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 Also, in addition to no income taxes when withdrawn,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 lets more
people, and those of lower incomes, 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 titled “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 by the fiscal cliff deal.
For more information and articles on
estate planning and elder law topics, please visit our website
and sign up for our free monthly e-newsletter. You can also friend
our law practice's Facebook page (R Christine Brown).
Reference:
CNN Money (January8, 2013) “More savers can convert to Roth 401(k)s
under fiscal cliff deal ”
MarketWatch (January 3, 2013) “Roth conversions easier, but are they right?”