Roth IRA Conversions: What They Mean For Shareholders

Thursday, February 13, 2020

A Roth IRA conversion can serve as a valuable tool for transferring wealth when applied under the proper conditions. But evaluating your own situation and deeming whether your traditional IRA or other qualified retirement plan is suited for such a transfer is a complex exercise - one that requires careful analysis and strategic guidance.

It's also important to understand, before embarking on the process, the nuanced distinctions between a traditional IRA and a Roth account. The primary advantages of the latter include tax-free growth and distribution, as well as no required minimum distributions.

There are costs associated with the conversions, however, and investors' unique circumstances should be weighed on a case-by-case basis. Value is typically optimized when investors can expect higher or equal returns during their retirement and will not need to make withdrawals in the near future. Additionally, funds must be available from outside the IRA in order to pay the conversion tax.

Intentions for the funds matter, as well. For example, investors who plan to make significant charitable donations may be best served by maintaining a traditional account. But if there are no plans for tapping into the account and the goals include passing on a significant balance to heirs, then a Roth conversion is not only viable, but a potentially remunerative transfer vehicle.

Interested in learning more? Read our Roth IRA Conversions whitepaper.


This information is not intended to provide or should not be relied upon for legal, tax, accounting, or investment advice. It does not take into consideration your individual circumstances. We recommend that you consult your attorney, tax advisor, accountant, investment advisor or other professional about your particular situation.

 

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