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New converts

August 5, 2014

In my last post in this space, I talked about how the fact that tax reform seems to have been tabled for now in Congress, making a thoughtful decision on whether or not to convert to a Roth IRA became more difficult. As promised, however, for those of you still thinking about a conversion, I did want to run through some of the key items to think about when making your decision:


  • There are no required minimum RMDs from Roth IRAs when you hit 70 ½. This is a big issue for many people, and the prime motivator for many to go through with a conversion.

  • Converting can pay off if you think/expect your IRA assets will go up in value. If you switch to a Roth before they appreciate, there is a lower conversion tax, and then if the account increases in value, that added value is essentially “tax free”.

  • The funds used to pay the conversion tax will lower your taxable estate. When tax time comes, the monies to pay out today can actually reduce your tax obligation.

  • One thing to watch out for is that a Roth conversion may trigger the 3.8% Medicare tax on unearned income. Larger Roth conversions in particular can kick you into a higher unearned income bracket for the next 12 months: the cutoff is $85,000 for singles and $170,000 for married couples.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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