ROTH-IRA CONVERSIONS

What is a Roth-IRA?

A retirement account that creates a Tax Free Income for participants and beneficiaries.

Annual Contributions
- Roth-IRA
- Roth-401(k)/Roth-403(b)
Conversion from IRA, SEP-IRA, Simple-IRA (after 2 year hold), 401(k) to Roth-IRA

Caution: Simple-IRA’s opened less than two years are not eligible for a Roth-Conversion and are subject to a 25% penalty tax.

Current Owner	IRA	Qualified Plans (if plan allows)

Original Owner	Yes	Yes

Inherited by Spouse	Yes	Yes

Inherited by Non-spouse	No	Yes

Now anyone can do a Roth conversion
- The $100,000 MAGI income limit is permanently repealed.
- Married individuals filing separately will be able to do a Roth conversion.
2010 conversion has option to pay income taxes in 2010 or spread the taxable income on the conversion amount equally over 2011 and 2012.
2011 conversion all taxes paid in 2011

ROTH-IRA Conversions

Benefits for conversion (pdf)
Who should not convert (pdf)
Qualified Distributions – free of all tax & penalty (pdf)
- Ordering Rules for distributions
- Roth-IRA Five-Year Rules – You Can Have More Than One
Pro-Rata Rule for IRAs, SEP-IRAs and Simple IRAs.
If you have after-tax contributions in an IRA, the balance of all your IRAs are used in calculating the percentage of after-tax dollars converted, if only one of several IRAs are converted or a partial conversion is made. You cannot just convert only the after tax amounts.

Caution: Age 70 1/2 Required Minimum Distribution must be taken before converting to a Roth-IRA

For a Roth-IRA Conversion analysis or questions email Harry Rubins.
General information only – review with your tax advisor before taking action.