Category - IRAs

1
How to Undo a Roth IRA Conversion and Save Money
2
The Pros and Cons of Establishing a Roth IRA For Your Child
3
Contribute to a Roth IRA Even If Your Income is Too High
4
Pros and Cons of an IRA
5
How to Undo Your Roth IRA Conversion in 2011

How to Undo a Roth IRA Conversion and Save Money

Losing money in the stock market is never fun, but what’s worse is having to pay tax on the lost market value. In 2010, the IRS changed the rules to allow anyone, regardless of their income, to convert an old 401k or a Traditional IRA to a Roth IRA, as long as they pay the tax on the converted value. Many people in the “higher” income brackets have taken advantage of this window of opportunity to gain access to the coveted Roth IRA, which is not available to high income earners.

Even though investors have to pay tax on the …

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The Pros and Cons of Establishing a Roth IRA For Your Child

Many times it is among the best of ideas to establish a Roth IRA for your child.  This way, your child can benefit from the long-term growth in the account and have a very good head start on retirement savings for later in life.  There are other benefits, including the fact that retirement funds are not included when financial aid is being calculated for college expenses, as well as providing funds for the child to use when the time comes to buy a house.

One potential problem

One thing can cause a real problem though: if you undertake to …

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Contribute to a Roth IRA Even If Your Income is Too High

I occasionally receive this question: Can I make a non-deductible IRA contribution, and then shortly after convert the IRA into a Roth IRA?  My income is too high for me to make a contribution directly to a Roth IRA.

According to the rules in place today, you can do this.  Here are the applicable rules:

  • There is no income limit for an individual to make a non-deductible IRA contribution.
  • There is no income limit for an individual to make a Roth Conversion.
  • There is no time limit on how long a contribution must be in a traditional IRA before converting
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Pros and Cons of an IRA

An Individual Retirement Account (IRA) is a great retirement savings tool for most individuals. Created by the federal government, IRAs can be funded during your working years.  During retirement, IRAs may help supplement your Social Security benefits. Your retirement savings can begin with your annual IRA contribution.

IRA Contribution Limits

If you are under age 50, the current maximum annual contribution amount is $5,000.  For those 50 years and older, an additional $1,000 can be contributed. If turning 50 this year, you are now eligible to contribute $6,000. The contribution amounts are adjusted for inflation each year by the federal …

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How to Undo Your Roth IRA Conversion in 2011

For those of you who took advantage of the one-time opportunity in 2010 to convert IRA funds to Roth IRA accounts, spreading the tax over the following two years (2011 and 2012), you are faced with a decision-point:  if you have reason to recharacterize the conversion, you have to do this by October 18, 2011.

Why recharacterize?

Here’s a ferinstance: If you converted $10,000 from your IRA account on December 31, 2010 into your Roth IRA and invested it in the S&P 500, that $10,000 converted is now worth approximately $8,997 (using a recent price).

If you are in the …

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