I have been getting a lot of financial planning questions from the Phoenix area about IRA to Roth conversion.
Beginning in 2010, you can convert a traditional IRA to a Roth IRA regardless of income level or filing status. With a Roth conversion, the taxable portion of your traditional IRA (deductible contributions and earnings) is normally subject to tax in the year of conversion. However, a special rule applies to Roth conversions in 2010: half of the resulting taxable income is reported on your 2011 federal income tax return, and the other half on your 2012 federal income tax return, unless you elect otherwise.
Consider a husband and wife both 45 years old with 2 kids ages 12 and 14. They have an old 401k valued at $100,000. By converting it to a ROTH they would pay around $25k in taxes over the next 3 years to convert. Now the money is tax free for life.
Without converting and retiring at 65, the total taxes you will have paid by age 80 is projected to be $315,240.
$25,000 now or $315,240 later. There are of course other consideration and we have other ways to get your money tax free as well.
If you live in Phoenix or anywhere in Arizona call me and I can run this calculator and do the basic financial plan over the phone. We can also show you how to set up an unlimited ROTH regardless of the income you make. Denver Nowicz 480-970-5663
