I Want You To Understand

Retirement, Income, Tax & Estate Planning.

I Want You To Understand

September 15, 2014 Uncategorized 0

The last few weeks I have been discussing some of the latest updates, provisions and changes to retirement accounts in my writings and on my radio show. When going over complex topics such as these changes, people can get confused and become unsure about what to do. As you can imagine, I have received several questions the last few weeks from our readers and listeners wanting some clarity. Since specific questions and answers in understandable English can go a long way with helping people better these understand changes, rules and provisions, we are devoting this week’s article and radio show to answering several of your specific questions to make sure you understand.

“Hi Peter… I have a question. I just turned 71 and have money in traditional IRAs that I am not currently using. I fear taxes will rise in the future and want to start doing Roth conversions. Can I take my required minimum distribution and convert that to a Roth IRA? Thank you.”

It would be nice, but no dice. Contrary to popular belief, your friends at the IRS state that you cannot convert your required minimum distribution (RMD) to a Roth IRA. You can only convert amounts above and beyond your RMD each year. This may be an issue if it puts you into a higher tax bracket. There are, however, other tax free accounts that can accept RMD amounts.

“Hello Peter…I am not able to make a Roth IRA contribution because of income limits. However, I heard that I can make a non-deductible IRA contribution and then convert that to a Roth IRA to get around that rule. Is this true?”

Yes and no. You can do this, but you have to be aware of the pro-rata rule. Under the pro-rata tax rule, all of your non-Roth IRAs are considered one IRA for tax purposes. So when doing a Roth conversion that includes after-tax amounts, you must include the balances in all IRA accounts, not just the account being converted. So you have to be very careful here or you could end up with a huge tax bill. Now for the big question; who do you love more…Congress or the IRS?

Join me this weekend and every weekend on WNTP 990 am Sunday’s at noon as we will be answering many more vital and important questions regarding retirement accounts and retirement planning from our readers and listeners. You can also obtain this information and obtain independent advice for your specific situation by contacting me at [email protected] or calling the office at 800-377-9967.

Investment Advisory Services offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable. However, we make no representation as to its completeness or accuracy. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided for informational purposes only and is not a solicitation to buy or sell any products mentioned.
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