Roth IRA Changes

For retirees seventy years old and above who do not depend on withdrawals from their IRA’s for living expenses, it is now possible, due to recent changes in the tax laws, to defer the mandatory withdrawals through conversion to a Roth IRA and continue to amass untaxed financial earnings that can be passed down to their heirs. Further, the new change in the law allows those who make $100,000 or less, excluding IRA withdrawals, eligible to convert to a Roth IRA.

Instead of paying taxes on money withdrawn from a traditional IRA (based on the holders’, or the heirs’, ordinary income tax rate), Roth holders pay taxes immediately on money transferred out of an IRA based on their current income tax rate. Roth holders, or most likely their heirs, are then able to withdraw tax free in the future and keep more money growing for a longer period of time.

For those that meet the requirements, a Roth IRA may be the appropriate investment vehicle. This new law may be worth discussing with your CPA or tax advisor.