Why the Downturn in the Financial Markets Could Be Good News For IRA Owners

I do not know of too many people were happy that it is precisely their investments "tank" together with the financial markets. Heck, some close friends of mine did not even glance at one of its mutual fund /brokerage statements for the past few months. They went from the mailbox on the "circular file", and while I do not go beyond that personally, reading the "red ink" does not exactly make me jump for joy either. On Halas

Consulting, we do not only to our clients' investments, we will focus also on risk management, and tax planning and preparation, and it is on the tax planning side discovered that we have the great opportunity that a IRA owner can be an advantage if he /she is a long-term thinker.

As much as I like Traditional IRAS, I absolutely LOVE Roth IRAS, after all, how could I not? Who would not like to totally tax-free money for retirement, or even after only 5 years from when you opened the account when you are older than 59 1 /2 at this time? If you are under 59 1 /2 you can have your money without tax liability to the amount you invested, you have to wait until 59 1 /2 to take the growth amount. Once you reach age 70 1 /2 you must create the required minimum distributions (RMDs) from a traditional IRA, whether you need it or not. This is not the case with a Roth IRA, you can use money from, if you wish, or if you want to leave the money to grow, because you decided a few more years, go to right. In short, if you like flexibility and saves money for a tax-favored basis, a Roth IRA is hard to beat.

Well, you may ask, what does the above discussion Roth IRA have to do with the crappy investment markets that we have, in recent times? I'm glad you asked. You see, when I customers, the IRAS, one of the first things I like to do is figure out how we can, to RASCALS Roth IRAS as soon as possible. The only "mistake" in this particular soup is that it is a tax on the IRA owner if he /she is in a Roth IRA. Since Uncle Sam May never be another cent out of this thing, he wants to make its "Licks" in while he still can. Whenever the investment markets are real high as they were a few years ago it would cost more money in the form of taxes, an IRA. For example, if your IRA was worth $ 100,000 in 2006, it would cost slightly more than 20,000 dollars, an IRA to a Roth IRA if you are in the 25% tax bracket and your income for the year, including the conversion was about 77,000 U.S. dollars (Note: This figure is a rough estimate of the tax, they do not take into account any extraordinary factors that may be present in your individual tax situation.)

However, if you decided to your traditional IRA to a Roth IRA In the fiscal year 2008, and 100,000 U.S. dollars your IRA is now worth 65,930 U.S. dollars because it has been invested in the S & P 500 Index, which was 34.07% at the end of October 2008, your tax liability would be approximately $ 13449.72 everything else remained the same. Perhaps this is still a bit too much for you, but would you be in favor of converting half of your traditional IRA to a Roth IRA? If yes, a $ 32,965-conversion (half of the 65,930 U.S. dollars) would cost you about 6724.86 U.S. dollars in the form of taxes. If the market goes back up again, and it always has historically, you have then the amount you started with (or more) and you may never pay taxes on this money again, nor will the government be able to tell you That you have to make a certain amount each year after 70 years of 1 /2!

If this idea is of interest to you, I recommend doing it, or discuss the idea with your tax or financial adviser as soon as possible. April 14, 2009 is not the time you want to implement the process as it will be too late. If you like the idea, but do not feel confident doing it yourself, and do not currently have a financial adviser, then please contact me at the e-mail address below and we can continue the possibility and see if it Makes sense for you.

 

Christian Halas is owner and wealth manager with Halas Consulting located in Pittsburgh, PA. Halas Consulting prides itself in providing unique and objective solutions to various insurance, investment, banking, tax, and estate issues faced by individuals and small businesses. Investment services provided in conjuction with Venn Wealth and Benefit Services, a PA Registered Investment Advisor. Christian can be reached via email at chalas@venn.us with any questions or comments on this article

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