The ability to convert regular IRA assets to Roth has not been available for long. Investors with more than $100,000 in assets have only just begun to enjoy the many benefits of IRA conversions.
Since this investment strategy did not exist prior to 2010, many individuals still have questions and concerns about the topic. The CKS Summit Group investment advisors are here to help clear up any confusion surrounding IRA conversions.
Converting your IRA does not necessarily have to be completed all at once. Many may elect to utilize a partial conversion instead.
A partial conversion can be particularly useful if the conversion to Roth would put you into a higher tax bracket for the year in which you convert. This push could be costly, and if you do not have enough cash on hand, it may be more than you can afford.
This is where the partial conversion comes in. However, it is important to remember that the Internal Revenue Service handles all IRA assets as one lump sum when calculating your tax burden. This means that each asset will be treated equally, regardless of whether it is a deductible or nondeductible asset.
Christine Benz of Morningstar also warns investors, “Whatever you do, don’t tap your IRA assets to help pay the taxes: You’ll pay a 10% early withdrawal penalty on any assets you don’t roll into the Roth.”
401(k) Conversion to Roth Assets
Many retirees partake in a 401(k) plan from their former employer. Fortunately, they too can utilize the benefits of an IRA to Roth conversion.
The conversion process of a 401(k) to Roth is very similar to that of an IRA to Roth. The current tax code also allows individuals the ability to roll over from a company retirement plan directly into a Roth, regardless of their income level.
A 401(k) to Roth brings upon many of the same concerns as an IRA conversion. Investors should definitely sit down beforehand with a financial advisor to calculate exactly how much of an impact this conversion would ultimately have on them and their retirement.
Contact the Experts at CKS Summit Group
At CKS Summit Group, all of our financial advisors possess the knowledge and experience necessary to best handle your retirement income planning needs. We will work directly with you to determine which investment opportunities bring the biggest benefit to you and your retirement.
To contact a CKS retirement planning professional and schedule your personal strategy session, please give us a call at 586-286-5820 or click here. Thank you, and we look forward to solving your retirement income challenges soon!