November 1, 2019
Read below to find out important guidelines and deadline information for Roth IRA Conversions, Contribution Limits and Required Minimum Distributions on certain retirement accounts.
Action required by December 5, 2019
Consider a Roth IRA Conversion
We encourage all clients to consider whether a Roth IRA conversion makes sense for you. We have discussed this item with many of you, and many chose to wait until the end of the year. Well, that is now! If you want to do a Roth conversion, please contact us immediately!
Monies from a Roth IRA grow tax free and can be withdrawn tax-free (for both you and your heirs), and Roth IRAs do not have RMDs (Required Minimum Distributions) during your lifetime. This means that Roth IRAs can be effectively utilized as a tax-planning tool during your retirement by keeping your taxable income lower, thus limiting your taxes in retirement and lowering taxes on SocialSecurity and decreasing Medicare surcharges.
Make Your Annual Roth IRA Contributions
There can be limits on the amount you can directly contribute to a Roth. If your income is below $122,000 for single (or $193,000 for married filing jointly), you can directly contribute the maximum allowable amount of $6,000 (plus $1,000 for the over 50 catch-up) to your Roth IRA.
If your income is above $122,000 for single (or $193,000 for married filing jointly), you would perform what is known as a “back door” Roth conversion. To accomplish this “back door” Roth IRA conversion, you would first make after-tax contributions to a Traditional IRA account with a zero balance and then immediately convert those IRA contributions into a Roth IRA account. Please note that there are no income limitations for after-tax contributions made to a Traditional IRA.
Please note that the amount converted from a Traditional IRA to a Roth IRA may be subject to income taxes at your ordinary income tax rate. Please feel free to consult with your tax professional.
Please let us know if you would like to contribute to your Roth IRA for 2019. Once you confirm your intent to make the 2019 Roth IRA contributions, we will send you another email (via DocuSign) to complete the necessary paperwork. Those actions must happen in 2019.
Required Minimum Distributions
In addition, RMD’s are also due by the end of the year, so please contact us to confirm that all amounts have been distributed.
Please let us know how you would like to proceed and if you have any questions.