How to stop the tax burden from growing?

Advanced Financial Concepts

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Posted by Money Talk in Tax Strategies at 12:55 | Wednesday, January 13. 2010 | Comments (0) | Trackbacks (0)

So, how do we grow our retirement savings while not growing the deferred tax burden? The answer: by doing a Roth IRA conversion today.

A Roth IRA conversion generally entails paying taxes on the accumulated IRA balance now, and thereby stopping the tax burden from continuing to grow, because once the money is in a Roth IRA, you create the opportunity to owe no taxes on any future growth in the IRA balance.

In contrast to traditional IRAs, whose withdrawals are generally fully taxable, Roth IRAs can provide a cash flow in retirement that is 100% free of income taxes. Future interest and investment gains are not taxed at all as long as the rules are followed. In general, the rules are no withdrawals prior to age 59½, and no withdrawals until
the Roth IRA account has been established for at least five years.

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