Like most affluent people,  you have probably thought very little about whether or not a Roth IRA would be an appropriate planning tool for you because your income  was in excess of the permissible limits.  However, now is the time to explore whether or not a Roth IRA would make sense for you.  As of January 1, 2010 the cap on the amount of income you are allowed to earn and be eligible to convert a traditional IRA or an eligible qualified plan to a Roth IRA will be eliminated.  In addition, if you convert your IRA to a Roth IRA in 2010 you have the option to spread the income tax liability over two years.

What are the advantages of converting to a Roth IRA?

• Tax Free Growth
• Tax Free Distributions
• No Required Minimum Distributions during participant’s life
• Ability to transfer greater wealth to heirs
• Ability to reduce estate tax liability

When does it make sense to convert to a Roth IRA?

• You are currently in a high income tax bracket and expect to be in a high tax  bracket through retirement
• Your estate is large enough that it is likely to be subject to estate taxes
• You are currently in a low income tax bracket but expect to be in a higher income tax bracket in retirement
• Your IRA assets have declined in value but you believe they will recover and continue to grow
• You have enough liquid assets outside of your IRA to pay the income taxes due on the conversion
• You want to give your spouse the opportunity to convert your IRA to a Roth at your death and are interested in learning about how to use life insurance to cover the conversion costs
• You have Charitable Deduction or net operating loss carry- forward that can help offset the tax cost of the conversion

To determine whether a Roth IRA Conversion makes sense, contact me today.

 *Contributions to a Roth IRA may generally be withdrawn tax-free at any time. Earnings may generally be withdrawn tax-free if the account has been held for at least 5 years and the withdrawal is made after age 59 ½.  If the withdrawal is made before the 5-year period or age 59 ½, income taxes and a 10% penalty tax may apply.

This material includes a discussion of one or more tax-related topics. This tax-related discussion was prepared to assist in the promotion or marketing of the transactions or matters addressed in this material. It is not intended (and cannot be used by any taxpayer) for the purpose of avoiding any IRS penalties that may be imposed upon the taxpayer.

This writing is provided for informational purposes only.   New York Life Insurance Company, its agents or employees may not give legal, tax or accounting advice and none is intended nor should be inferred from the forgoing information.  We must necessarily insist that everyone seek and rely upon the guidance of their own professional counsel for such advice and that such advisors must form their own opinion on these matters based upon their independent knowledge and research.