Wed 11 Nov 2009
New Tax Law for Roth IRA May Be a Bad Deal for Taxpayers
Posted by EPR Network under Business, Consumer Services, Economy, Featured, Financial, Government, Internet & Online, Law
Released on: November 11, 2009, 1:07 am
Author: Nabers Group
Industry: Financial
Jeff Nabers, CEO of the Nabers Group an unconventional financial planning firm located in Denver, CO, cautions those to carefully look at all their options when considering a Roth IRA conversion.
Denver, CO, November 11, 2009 — In 2010 millions of Americans will be able to do something they have never done before—convert their IRA into a Roth IRA account. Current 2009 limitations do not allow anyone who makes more than $100,000 per year to convert their traditional retirement funds into a Roth IRA.
However, beginning in 2010, the Roth IRA conversion restrictions are being lifted. But is this really a good thing for taxpayers?
“Roth IRAs are a bad idea for taxpayers because they are paying taxes now in order to avoid paying taxes on distributions that are taken later,” said Jeff Nabers, CEO of Nabers Group. The problem is partly the economic crisis that we are in. “It makes sense if we were in a commodity-based monetary system, but we’re not. We have a fiat currency system that creates an inflationary environment in which Roth conversion is a good deal for the government and a bad deal for the taxpayer.”
Additionally, the Roth IRA conversion can be costly for the taxpayers. If they opt to convert their traditional IRAs to Roth IRAs, the IRS will view this as a taxable event. Accountholders will be taxed based on the entire conversion amount for their current tax bracket. The income taxes due on the 2010 conversion can be spread over two years. However, future conversions must be included in income reports to the IRS and will be taxed during the tax year in which the conversion is completed.
