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Lifestyles in Palm Beach Gardens, Page 19
Financial Focus ®
When Is A Good Time For taxes. You’ll be taxed on the amount in pre-tax dollars you • No RMDs—With a traditional IRA, you’ll have to
contributed to a traditional IRA and then converted to a Roth
start taking withdrawals — called required minimum
Roth Conversion? IRA. (If you have both pre- and after-tax dollars in your distributions, or RMDs — when you turn 73, or 75 if
traditional IRA, the taxable amount is based on the percentage you were born in 1960 or later. But there’s no RMD
By Sally Sima Stahl, of pre-tax dollars.) requirement with a Roth IRA — you can essentially leave
Edward Jones Why is a Roth IRA desirable for some people? Here are the money intact as long as you like.
In life, you often get the key benefits: Timing also comes into play with the financial markets.
second chances—and the If you have large amounts in a traditional IRA, the tax When the market is going through a decline, and the value
same is true with investing. bill on conversion can be significant. The key to potentially of your traditional IRA drops, you could convert the
To illustrate: You might not lowering this tax bill is timing. Generally speaking, the lower same number of shares of the underlying investments and
have been able to contribute your income in a given year, the more favorable it is for you receive a lower tax bill or convert more shares of these
to a Roth IRA during your to convert to a Roth IRA. So, for example, if you have already investments for what would have been the same tax bill.
working years due to your retired, but have not started collecting RMDs, your income • Tax-free legacy for your heirs—When your heirs
income level, but you may get may be down. inherit your Roth IRA, they can withdraw the contributions
that opportunity as you near • Tax-free withdrawals—you put in after-tax dollars to a without paying taxes or penalties, and if the account has
retirement or even when you Roth IRA, so you can withdraw your contributions at any been open for at least five years, they can also withdraw
are retired—through a Roth conversion. time, free of taxes and penalties. And if you’ve had your earnings tax-free.
And you can do so by converting your traditional IRA account for at least five years and you’re at least 591⁄2, Finally, you could lower your tax bill in any given year
to a Roth. While this sounds simple, there’s a major caveat: you can also withdraw your earnings free of taxes. by stretching out your Roth IRA conversions over several
years, rather than doing it all at once.
But even if you were aware of these advantages, you
might not have been able to invest in a Roth IRA for
much of your life. For one thing, you might have earned
too much money— a Roth IRA, unlike a traditional IRA,
has income limits. Also, a Roth IRA has only been around
since 1998, so, in the previous years, you were limited to
a traditional IRA.
You’ll want to consult with your tax advisor before
embarking on this conversion—but if it’s appropriate for
your situation, you could find that owning a Roth IRA
can benefit you and your family for years to come.
As you approach retirement, though, you might start
thinking of just how much you’d like to benefit from a
Roth IRA.
This article was written by Edward Jones for use by
your local Edward Jones Financial Advisor, Edward
Jones, Member SIPC.
Edward Jones is a licensed insurance producer in
all states and Washington, D.C., through Edward D.
Jones & Co., L.P., and in California, New Mexico and
Massachusetts through Edward Jones Insurance Agency
of California, L.L.C.; Edward Jones Insurance Agency of
New Mexico, L.L.C.; and Edward Jones Insurance Agency
of Massachusetts, L.L.C.
Edward Jones, its employees and financial advisors
cannot provide tax advice. You should consult your
qualified tax advisor regarding your situation.
Contact us at (561) 748-7600, Sally Sima Stahl, CFP ,
®
AAMS , 1851 W. Indiantown Road, Ste. 106, Jupiter, FL
™
33458.
