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Richard Campbell - Investment Securities and Advisory Services

Special Topic: Roth IRA Conversion

Effective January 1st, 2010, conversions from tax-deferred retirement plans, such as IRA, to ROTH plans will be eligible for special tax treatment. Any amount converted from a traditional plan to a ROTH is considered a taxable distribution. ROTH conrtibutions are not tax deductible. The advantage of ROTH is all growth within the account can be distributed entirely tax free, provided all the rules are followed. For conversions, you will have the option to defer paying tax on half of the amount converted until 2011 and until 2012 on the other half. The purpose is to allow tax-free growth on the conversion for at least one year before having to settle with the IRS.

Is ROTH conversion right for you?

  • Will you be in a higher tax bracket when getting retirement distributions?

  • Do you currently have Net Operating Loss (NOL) to absorb?

  • Are you over-weighted in traditional tax-deferred retirement plans?

  • Is your time horizon long enough to overcome the conversion tax?

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