Should I rollover my Traditional IRA into my 401K?

I just started a Traditional IRA account about a year ago, but just recently my company started a 401k for it’s fulltime employees. Should I contribute to both accounts or should I rollover my IRA into my 401k? Why or why not? If it matters, I have only about $1,000 so far in both accounts.

Self-Directed 401K — Should I Have an LLC Component to MY Plan?

Click for Our FREE Offer!!!! retirementfundsecrets.com visit us at pgiselfdirected.com PGI’s TRUEIRA and TRUE 401k combine the best of both worlds. The flexibility to invest when, where and how you choose along with 100% CHECKBOOK CONTROL. No more waiting. No more paperwork. Investing is as simple as writing a check. All these benefits, and the TRUE Self-Directed IRA and TRUE 401k are less costly to maintain. Fees are significantly lower than Traditional “Self-Directed” custodians.

Roth IRA Conversion – Pros and Cons

Effective January 2, 2010, Roth IRA conversions are no longer limited by an earnings test. With this earning test eliminated many financial professionals are advising individuals to convert their traditional IRAs into Roth IRAs. But is a Roth IRA conversion right for everyone? In this article we will explore the pros and cons of doing a Roth IRA conversion.

Overview

Traditional IRAs allow individual who qualify, to make a tax deductible contribution. When it comes time to make qualified distributions, these distributions are taxed at whatever your effective tax rate might be in the year of the distribution. Roth IRAs allow individuals who qualify to make contributions which are not tax deductible. When qualified distributions are made from a Roth IRA, such distributions are tax-free.Often, individuals who change jobs or are terminated have the option of rolling their retirement plan funds into an IRA. In the past, most individuals have rolled these retirement funds into traditional IRAs (rollover IRAs). Effective January 2, 2010, individuals with traditional IRAs (rollover or otherwise) are eligible to convert their traditional IRAs into Roth IRAs, irrespective of their level of income.

Pros of a Roth Conversion:

1. Tax-Free Distributions – Qualified Roth IRA distributions are never subject to federal income tax. Roth IRAs represent a hedge against future tax increases; 2. No Required Minimum Distribution – Traditional IRAs have a requirement that distributions must begin in the year an individual turns 70 1/2 (or by 4/1 of the year following the year an individual turns 70 1/2). This is called a Required Minimum Distribution. Roth’s have no Required Minimum Distribution requirement. Thus, there is no requirement to withdraw any Roth funds during one’s lifetime; 3. Reduction in Taxation of Social Security Benefits – Because qualified Roth IRA distributions are tax-free, you can reduce the amount of your Social Security benefits which are subject to income tax. Generally, the amount of Social Security benefits which are subject to income tax are tied to the amount of other types of taxable income you receive during the year. By converting traditional IRAs into a Roth, you can reduce your future taxable income and, thus the amount of Social Security benefits which are taxable; 4. Penalty-Free Withdrawals – Taxpayers can withdraw the converted amounts without penalty after five years; 5. Benefits taxpayers most who expect to be in a higher tax bracket at or near retirement age; 6. If the taxpayer’s traditional IRA has lost value recently, converting to a Roth IRA can be done at a lower tax cost; 7. Benefits taxpayers most who have a long time horizon and will not need to withdraw from their converted Roth for some time; 8. Provides an income tax-free legacy for your heirs; 9. The tax on 2010 conversion amounts may be paid 50% in 2011 & 50% in 2012 (deferred).

Cons of a Roth Conversion:

1. For taxpayers who expect to be in a lower tax bracket at or near retirement, the tax benefit of a Roth IRA may be reduced; 2. If the taxpayer does not expect to live very long then the stretch/legacy/tax benefits of the Roth IRA will be reduced; 3. Roth conversions come with a tax cost. Payment of the tax on conversion should be from available cash, and not from the IRA itself, as such a distribution will be subject to a 10% penalty, if the taxpayer is under 59 1/2, as well as income tax on the distribution.

Best Candidates for a Roth Conversion

Some taxpayers benefit from a Roth conversion more than others. The best candidates for a Roth conversion include:

1. Wealthy Taxpayers; 2. Taxpayers seeking to reduce estate settlement costs; 3. Taxpayers who will not need to withdraw from the converted Roth IRA for some time; 4. Young taxpayers who are high-income earners; 5. Taxpayers who believe they will be in the same or a higher tax bracket in retirement.

Part 5 of Solo 401k vs. Self Directed IRA – No Custodian Required

www.solo401k.com (Nabers Group) 877-SOLO-401K. The owner of the world’s only full service self directed IRA & 401k provider presents the advantages of an Unlimited Solo 401k. This is a retirement account that is legally able to invest in gold, real estate, private companies, mortgages, LLCs, and virtually anything else.

Roth Ira Contributions – An Interesting “work-Around” To The Income Limits

[If you are an investor who makes more than the income limit for contributions to a Roth IRA - this MAY be for you!]

 

Many people have Roth IRA’s that they opened in the late 1990′s.  For some, they have been unable to contribute to their Roth IRA since then, due to income limits.  In 2009 and 2010, the income limit for someone to contribute to a Roth IRA (married, filing jointly) is $176,000 and $177,000, respectively.  [This limit is based on Adjusted Gross Income (AGI) and the amount that someone can contribute starts to phase out at $166,000 (2009) and $167,000 (2010)]

In 2009 and 2010, the maximum contribution is $5000 for each year (this amount is higher if you are over 50).

There has always been both an income limit for contributions and a maximum amount that could be contributed.  It has been indexed for inflation each year.

 Conversions from a Traditional IRA to a Roth IRA are a different story.  The income limit has been $100,000 since the inception of the Roth IRA.  In 2010, this limit was removed (much more on this in other postings).  In other words, in 2010 anyone, regardless of income, can convert funds in a Traditional IRA to a Roth IRA.

This has introduced an interesting “work around” to the AGI limit for contributions mentioned at the top of this article.

While I have seen it mentioned in some blogs and other articles, I am surprised that I haven’t seen it more often in the mainstream media.

If you make more than the income limit to contribute to a Roth IRA, this may be for you…………….

Here is how it works:

1.     Open a Traditional IRA

2.     Make the maximum contribution for 2009 (by April 15th) and 2010 – $5000 for each year, unless you are over 50

3.     Don’t deduct the contribution (I will explain in a second)

4.     Immediately convert the Traditional IRA to a Roth IRA 

5.     Voila!  You have just gotten $10,000 into a Roth IRA when you otherwise would have been forbidden to do so (based on your income)

Since you didn’t deduct the contribution, there are no taxes due on the conversion (unless there was some interest or gain between the time you opened the Traditional IRA and the conversion – that is why I stressed converting immediately after the account is opened). 

Yes.  I know.  Seems too good to be true!  Well, there is at least one “catch”….

Non-deductible IRA’s are aggregated with all other IRA’s to determine what proportion of the conversion would be taxable.  If you have an IRA rollover from a previous employer (or any IRA that has pre-tax money in it), then at least a portion of the conversion would be taxable.

For that reason, this strategy works best when an investor has NO OTHER TRADITIONAL IRA MONEY.

401(k)’s that are at previous employers don’t count against you…..as long as they are still in the 401(k) – and not in a Rollover IRA.

Self-Direction — Can MY SD IRA/401K Purchase Property I Already Own?

Click for Our FREE Offer!!!! retirementfundsecrets.com Contact Me IfYou Need Advice Or Guidance (totally free and no hassle): john@pgiselfdirected.com (602) 684-2922 visit us at pgiselfdirected.com PGI’s TRUE IRA and TRUE 401k combine the best of both worlds. The flexibility to invest when, where and how you choose along with 100% CHECKBOOK CONTROL. No more waiting. No more paperwork. Investing is as simple as writing a check. All these benefits, and the TRUE Self-Directed IRA and TRUE 401k are less costly to maintain. Fees are significantly lower than Traditional “Self-Directed” custodians.

Self Directed IRA: The Basics (Part 1) James Smith Real Estate

www.jamessmithseries.com James Smith is a real estate and investment expert and in this multi-part series, walks people through the fundamentals of investing with a self-directed IRA. Unlike other video authors, James is not selling an IRA account and therefore is able to maintain an unbiased approach to IRA investing. Visit his channel, youtube.com for more useful videos.

Conversions to a Roth IRA

The fund that you roll over from a traditional IRA into a Roth IRA are taxable in the year of the rollover. For example, if you rollover $50,000 in 2009. Even though a conversion to a Roth IRA causes you to pay current taxes on the amount rolled over, the amount will then grow tax-free in the Roth IRA.Roth IRA rollovers work best if you have funds outside the IRA to use to pay taxes on the rollover. For example, a rollover of $50,000 into a Roth IRA may result in $10,000 in income taxes. It’s best to rollover the entire $50,000 and pay the taxes with $10,000 that you have outside your IRA. If you need to take $10,000 from your traditional IRA to pay the taxes, you wind up with only $40,000 left to rollover into the roth IRA.A traditional IRA can be converted to a Roth IRA in one of three ways:Rollover: Assets from a traditional IRA can be contributed (rolled over) to a Roth IRA within 60 days after their distribution.Trustee-to-trustee transfer: The financial institution holding the traditional IRA assets transfers those assets to a Roth IRA. In this case, the transfer should be simpler because it occurs within the same financial institution.Here are a few upcoming changes for conversions:Effective after December 31, 2007, direct rollovers from the tax-qualified retirement plans to Roth IRAs will be permitted. These rollovers are subject to the same rules that apply to conversions from a traditional IRA to a Roth IRA.Effective for tax years beginning after December 31, 2009, the requirement that a taxpayer’s gross income no exceed $100,000 to be eligible to convert a non-Roth IRA to a Roth IRA will be eliminated.A special rule has been established for rollovers to Roth IRAs in 2010. Amounts rolled over into a Roth IRA in 2010 aren’t included in your income in 2010; instead, 50 percent of the amount is included in your income in 2011 and 50 percent in 2012. That’s quite a deal for the year 2010 because none of the rollover will be included in your income. This deal is something you should seriously consider.

Can MY SD IRA/401K Take Out a Mortgage on a Rental Property?

Click for Our FREE Offer!!!! retirementfundsecrets.com Contact Me IfYou Need Advice Or Guidance (totally free and no hassle): john@pgiselfdirected.com (602) 684-2922 visit us at pgiselfdirected.com PGI’s TRUE IRA and TRUE 401k combine the best of both worlds. The flexibility to invest when, where and how you choose along with 100% CHECKBOOK CONTROL. No more waiting. No more paperwork. Investing is as simple as writing a check. All these benefits, and the TRUE Self-Directed IRA and TRUE 401k are less costly to maintain. Fees are significantly lower than Traditional “Self-Directed” custodians.

Considering A Gold IRA: Questions To Consider Prior To Adding Gold To Your IRA

2 Questions To Consider However Prior To Adding Gold To Your IRA Retirement Portfolio: 1. Is there another investment that you know of that has held its value for as long gold has and is on the rise? 2. Are you concerned about the value of your paper assets such as bonds, stocks and mutual funds held in US dollars within your IRA on Wall Street will be there when you retire? Complete your own studies regarding Republic Monetary Exchange at www.RepublicMonetary.com or you can even call them at 877-354-4040 with your questions about how to make gold a part of your retirement account. After you speak to them and have made your decision to invest in gold for your retirement, log on to http or call 505-237-2225 to create your own gold IRA and begin the processes of creating your kingdom for your retirement.

Next Page »