Converting a Traditional IRA to a Roth IRA – Episode 138

Summary:

Best-selling author Kim Butler and no B.S. money guy Todd Sterobel talk about how to convert a traditional IRA to a Roth IRA. They discuss the Who, Why, and How to convert. They also talk about certain situations in which converting to a Roth IRA would not be beneficial. There are several advantages of converting to a Roth IRA that Kim and Todd discuss in detailed, yet simple and clear terms.

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Show Notes:

00:00 Introduction

01:02 There is no income requirement for converting a traditional IRA over to a Roth IRA

01:26 Kim answers the how, why, and who the Roth IRA is a good strategy for

01:56 The Who: converting can be beneficial if you have the dollars to pay the tax that are going to be due

03:06 Converting is good for people who believe that taxes are going up, that want to access the Roth IRA tax laws, and have extra cash sitting around

03:47 Yes, you can do a partial conversion

04:38 If Hillary Clinton’s plan goes through all loopholes may be cut so this might be your only time to convert to a Roth IRA

05:02 People are believing that taxes are going to go up– it would be beneficial to go ahead and pay the taxes now and put those tax dollars into a Roth IRA and you would not pay taxes on it in the future

06:13 The Why: You have enough dollars TODAY that you are willing to pay the tax with. You may want to even take a lower income this year and convert to the Roth IRA and because you are in a lower tax bracket, you pay lower taxes on the IRA conversion

07:19 Todd makes a point that those parents sending their kids off to college and trying to receive financial aid, may NOT want to convert to a Roth IRA as having that extra income could affect that negatively

07:47 Kim talks about the advantages of the Roth IRA– it’s like the old adage: Roth IRA law is like paying taxes on the seed, and not on the harvest

08:42 One of the differences between a traditional IRA and Roth IRA is that a traditional IRA pays taxes at distribution, whereas a Roth IRA does not

08:59 The How: There’s 2 ways– 1. A simple conversion just requires paperwork 2. Get a discount for that conversion in other words, get taxed on a lesser dollar amount

11:12 There are no penalties for converting to a Roth IRA

12:41 Special email for podcast listeners only is: welcome@ProsperityThinkers.com get the ebook atprosperitythinkers.com/ebook audio version available also