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Tom Meaglia, ChFC®, AEP®,
CLU®, CRPC®, MSFS
Chartered Financial Consultant
Investment Advisor Representative
Chartered Retirement Planning Counselor
CA Insurance Lic. #0567507
Meaglia Financial Consulting
2105 Foothill Blvd., #B140, La Verne, CA 91750
Toll Free: 800-386-3700
Bus: 909-593-6105
Cell: 818-681-8600
Fax: 909-593-6120
Email: tom@meagliafinancialconsulting.com
Website: www.meagliafinancialconsulting.com
July/August 2021
Trending Now: Roth IRA Rollovers
Tax-free withdrawals* and no required minimum distributions (RMDs) at any age are two characteristics that make Roth individual retirement accounts (IRAs) popular with investors. Current relatively favorable tax rates have made rollovers from traditional IRAs an option to consider. But, as with any investment, it’s important not to rush into a rollover without first considering the possible effects of such a move.
Roth IRAs in a Nutshell
Contributions to a traditional IRA are made before income taxes are taken out, allowing your savings to accumulate tax deferred until you withdraw the money, presumably at retirement. You must begin taking distributions from traditional IRAs and other tax-deferred retirement accounts once you reach age 72.**Alternatively, contributions to a Roth are made with after tax dollars, so withdrawals of earnings are tax free after age 59½, as long as you’ve had the Roth IRA for five years. (Roth contributions can be withdrawn tax free at any time, but an early withdrawal penalty may apply.) And you are not required to take distributions during your lifetime, so if you don’t need the money, you can pass along the Roth account to your heirs.
The Taxing Details
If you’re thinking of rolling over funds from a traditional IRA to a Roth IRA, make sure you have sufficient funds to pay the taxes on the amount you roll over—preferably without tapping into the account. Keep in mind that the conversion could push you into a higher income tax bracket, because that money will be taxed as income in the year you roll it over. If you’re enrolled in Medicare Part B, the income from converting a traditional IRA could also result in a high-income surcharge on your premium in a future year.When a Rollover Might Make Sense
If you’ve experienced a drop in the value of your traditional IRA recently, rolling over the funds to a Roth IRA while the value of your investments is down may lower the tax hit.*Roth IRA withdrawal and penalty rules vary depending on your age and how long you’ve had the account and other factors.
**Taxpayers born before June 30, 1949 must still use age 70 1/2 to start takings RMDs.
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