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The Roth topic continues to be popular in the retirement planning arena.
For 201 1 , the maximum Roth Individual Retirement Account contribution remains at
The maximum Roth 401(k) contribution is
2010 was an important year for Roth conversions, as the
As of 2006, 401(k) plan participants can convert their accounts directly to Roth IRAs. Plan sponsors of 401(k) and 403(b) can now allow participants to convert their traditional 401(k) accounts to Roth 401(k) accounts. In order to do this in-plan conversion, the plan must have the designated Roth option. This conversion is very similar to a Roth IRA conversion. There are, however, two very important differences: A plan participant must be eligible to take a distribution from the plan. If a client has separated from service, he/she should be able to do a conversion. For individuals currently employed, the plan must allow inservice distributions. Second, there is no recharacterization provision. Therefore, this type of conversion cannot be undone.
Roth accounts are appropriate for some, but not all, clients. With a traditional IRA, contributions may be tax-deductible, earnings are taxdeferred, and there are no income limits for contributions. However, minimum distributions will be required (generally at age 70 1/2).
Traditional IRA distributions may adversely impact the taxability of
The biggest advantage of a Roth IRA is that distributions can be tax-free. Therefore, there is no negative impact on
It’s also important to note that converting a traditional IRA to a Roth IRA is a taxable event.
There is an additional consideration when thinking about the Roth. Roth IRA assets can be invested in a variable annuity. If the annuity has a living benefit (available for an additional cost), clients can receive guaranteed tax-free income that they cannot outlive. This combination enhances the power of the Roth, which could be very important in these times of uncertainty in the federal tax environment.
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For 2011 (and beyond), there is Still no income limit to do a Roth conversion.