Author Topic: Converting to A Roth and thoughts to consider  (Read 1871 times)

usmarine1975

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Converting to A Roth and thoughts to consider
« on: September 09, 2014, 08:33:36 AM »
http://online.wsj.com/articles/should-i-leave-a-roth-to-my-heirs-1410120116?ru=yahoo?mod=yahoo_itp

I use a Roth, and have converted some to my Roth.  But this article raises a good question that should be considered in your overall plan especially in relation to passing your assets to your heirs.

not_a_trex

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Re: Converting to A Roth and thoughts to consider
« Reply #1 on: September 09, 2014, 09:08:44 PM »
I haven't really looked into beneficiary planning. Can we make comparisons for discussion? What options would beneficiaries have they have if the money wasn't in a Roth?

Undecided

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Re: Converting to A Roth and thoughts to consider
« Reply #2 on: September 09, 2014, 09:25:29 PM »
http://online.wsj.com/articles/should-i-leave-a-roth-to-my-heirs-1410120116?ru=yahoo?mod=yahoo_itp

I use a Roth, and have converted some to my Roth.  But this article raises a good question that should be considered in your overall plan especially in relation to passing your assets to your heirs.

Isn't it really just a question about whether to convert a TIRA to a Roth IRA if it involves a taxable event, though? Notwithstanding the breadth of the title of the article, I think that's the only area where there's a current question to be asked. Not sure what I'm supposed to do with the information that tax laws could change ....

usmarine1975

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Re: Converting to A Roth and thoughts to consider
« Reply #3 on: September 09, 2014, 09:28:21 PM »
For me its just a matter of being aware the laws can and do change and it should be considered in your overall plans and re in forces the necessity to review said plan on a regular basis.

Frankies Girl

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Re: Converting to A Roth and thoughts to consider
« Reply #4 on: September 09, 2014, 09:50:23 PM »
I haven't really looked into beneficiary planning. Can we make comparisons for discussion? What options would beneficiaries have they have if the money wasn't in a Roth?

Inherited traditional IRAs have two possibilities if it's a non-spouse heir; they can set it up as an inherited IRA and take the required minimum distributions based off their age (and this will count as income, so taxes are a consideration), or they could be forced to basically liquidate the entire IRA within a 5 year period if it is not set up correctly (which would suck since the tax hit could be significant). In any case, since traditional IRAs are pre-tax money, the government wants their cut, and you have to take distributions out at some point, even if you don't need the money.

Roths do not currently require any distributions and there are no taxes owed on the money withdrawn. So your heirs could conceivably keep the Roth forever and pass it down to their heirs.

While I do keep reading all this stuff about how proposed changes could effect the way Roths are allowed to operate, I can't really believe that these changes would ever come about because the Roth is such an important part of the retirement savings puzzle and screwing around with it like this isn't going to encourage people to save. And the article is saying things like converting a traditional with 3 million in it to a Roth in one fell swoop, which is just crazy talk... who does that? That's just asking for them to take more money in taxes due to you popping up into a higher tax bracket due to the conversion.


usmarine1975

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Re: Converting to A Roth and thoughts to consider
« Reply #5 on: September 09, 2014, 10:29:49 PM »
Mitt Romney has a pretty substantial Roth account. He was criticized for it during the election. Certainly he isn't alone among the rich using the Roth.

For the average American the laws changing or not changing are not as substantial.  Just thought it was an interesting read.