2010 Roth IRA rules could save taxpayers tens of thousands in taxes just in time before expected tax hikes affirms Best IRA Rescue.com
[USPRwire, Mon Dec 07 2009] The new conversion Roth IRA rules signed by President Bush was enacted by the Tax Increase Prevention and Reconciliation Act on May 17, 2006 which allows the taxpayers with a MAGI of over $100,000 to roll over their traditional IRA moneys to their Roth IRA. Depending on their situation, these new Roth IRA rules will offer the wealthy tax-free retirement income and decrease their capital gain and income taxes into retirement states Rocco Beatrice of Estate Street Partners and retirement planner of BestIRARescue.com.
"Congress urgently needs the money due to the deficit spending," explains Rocco Beatrice, Managing Director of Estate Street Partners and retirement planner of BestIRARescue.com. "They want us to convert so desperately, they are giving away the farm to persuade us to do it. For conversions done in 2010, we won't have to pay any taxes until the 2010 tax year ??" for most, this means calendar year 2011. Then, the taxes can be spread equally over two years and included in income for 2011 and 2012. Yes, you are reading that correctly - you won't owe any tax in 2010 (the year of conversion) and taxes due on a conversion done in 2010 are not included in income until the 2011 and 2012 tax year (the 2012 and 2013 calendar year)! That's like getting an interest free loan to build a tax-free savings account."
The new IRA rules that allow one to roll over an unlimited amount from their traditional IRA to their Roth IRA. How much one can contribute to their Roth IRA is determined by their age. Currently, if the contributor is under 50 years of age he can contribute $5,000 and if he is over 50 then he can contribute $6,000. Compare this to the hundreds of thousands of dollars that can now be placed into a Roth IRA.
Many financial planners agree that a hike in income and capital gains taxes are inevitable very soon due to America's insurmountable deficit of $12 trillion ??" equating to $120,000 per working adult. The average working adult in the United States makes $39,000, so if everyone dedicated their entire salary to eliminating this debt, it would take 4-6 years to repay the debt with after-tax dollars. In other words, it may be best to pay taxes now then wait when one will have to take distributions at retirement when taxes could be much higher.
Mr. Beatrice warns, "You may have to pay $25,000 in taxes for rolling over $100,000 in 2010 but if you wait in a few years when you have to cash out your Roth IRA you could be paying $32,000 or more."
The other major incentive for rolling over to a Roth IRA in 2010 is that individuals will not have to be taxed for the converted income in the year of conversion. For instance, if the individual converted $100,000 to a Roth IRA in 2009 he would be forced to pay $35,000 in taxes (assuming a tax bracket of 35%). But if this conversion is made in 2010, he could spread the income conversion over 2011 and 2012. So, in essence, he could claim $50,000 in 2011 and $50,000 in 2012 potentially saving him thousands in tax dollars if he optimizes his income with the tax brackets.
"The new Roth IRA rules benefit the wealthy as they are the ones that will be able to pay the taxes upfront and convert large sums of money from their traditional IRA accounts. There is an additional retirement plan strategy for the wealthy called the Roth on Roids(tm) which allows contributions even if they make more than $100,000 per year. Under current Roth IRA rules an individual cannot contribute to their Roth IRA if their income exceeds $100,000," Mr. Beatrice explains. He believes the wealthy are the real winners in terms of income earners since their net worth will accumulate and grow tax-free. However, he advises younger investors to roll over to the Roth IRA or, a better option yet, the Roth on Roids(tm) as early as possible since they have a longer time to grow their investments tax-free.
Best IRA Rescue.com provides advanced strategic IRA and retirement plan investing specializing in helping clients choose the best IRA. Best IRA Rescue.com offers the Roth IRA on Roids (Roth on Roids(tm)), an advanced Roth IRA retirement planning strategy offering individuals IRA tax-savings with benefits of a guaranteed death benefit, guaranteed principal, tax-free growth, and tax-free distributions from your policy loans. Roth IRA on Roids is an excellent choice for the hard times ahead. View IRA articles: When do you pay taxes on a Roth IRA?, How much can I put in my Roth IRA?
BestIRARescue.com is based in Boston, MA with additional regional offices in Las Vegas, NV and Costa Mesa, CA. Please call toll-free 1-888-93ULTRA (888-938-5872) for a free initial consultation.
Rocco Beatrice, Managing Director of Estate Street Partners
Head office - 10 Commerce Way #1, Raynham, MA 02767
rbeatrice (at) bestirarescue (dot) com