Understanding Roth IRAs and the New Conversion Opportunity

More and more Americans are seeking out financial planning tools that help address their long-term retirement needs. One such tool is the Roth IRA. First introduced in 1997, a Roth IRA can provide tax-free earnings for retirement income and a significant wealth transfer planning opportunity, when used appropriately.

As of January 1, 2010, Americans have the option of converting a regular IRA to a Roth IRA-regardless of their income level. For many, this change represents a compelling reason to invest money in a tax-advantaged retirement savings account. But remember that you do need to hold the Roth IRA for five tax years to qualify for income tax-free treatment. Additionally, if you need to access the funds before five years and you are not age 59 1/2 or older, then a penalty tax may apply on the amounts withdrawn.

Making the Decision

To help you make a more informed decision about converting your traditional IRA, we brought together George R. Barnes, a financial planner with Prudential Financial Planning Services, and Robert Fishbein, a vice president and corporate counsel with Prudential Financial, in the video at right to address questions and concerns investors have about this financial transaction, including:

Roth IRA Conversions: Your Questions Answered


  • When a Roth conversion might make sense
  • The impact of tax rates on a Roth conversion
  • The effect of a conversion on eligibility for programs, including college financial aid, Medicare, etc.

 

Prudential Financial, its affiliates, and their licensed financial professionals do not render tax or legal advice. Please consult with your tax and legal advisors regarding your personal circumstances.

The opinions and recommendations expressed are subject to change without notice and do not take into account inidividual client circumstances.

 

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