Turn to Roth IRA to Save Taxes



Posted: Tuesday, November 11, 2008

by
Ameri-Financial

With the markets rebounding from their lows in mid-October there is optimism in the air. Which direction the market chooses in the near future is going to depend largely on third quarter corporate earnings reports due out through November and December. However, one thing is sure: for those looking to move retirement funds from traditional IRAs to Roth IRAs – now is the time. The move should save you cash by minimizing the taxes due to a lower value.

If your account has dropped the average 30% in value recently, you may want to act fast to take advantage of lower costs. "Stocks could continue to slip. However, if you've already lost value in your portfolio, you'll reduce the impact of transferring taxable dollars", says our senior strategist Sean Levin. "By rolling your funds into a Roth now, you start earning tax-free. So gains will be greater if the market goes in the direction that - by some indicators like today's run up and lowering rates - shows future improvement".

Though Roth IRA contributions are not tax deductible, earnings and withdrawals after age 59 and 1/2 are tax-free. Created under the Taxpayer Relief Act, Roth contributions are limited to $5000 for ages 49 or below and $6000 for 50 and above. That's up 150% since its inception in 1997.
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