Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, November 27, 2014

Roth IRA Conversions No Longer on Sale

Black friday

Black Friday is right around the corner, but there won’t be any deals on Roth IRA conversions.  For Roth IRA account owners who did conversions in November 2012, the two-year increase of 5,200 points or 41 percent has been a windfall. These individuals have benefitted in three different ways:

  1. Elimination of income tax on 100 percent of Roth IRA appreciation. Those who did a Roth IRA conversion in November 2012 have eliminated taxation on 100 percent of sizable appreciation in the value of their Roth IRA in just two years.  Yet, even with the inevitable stock market downturn, the opportunity for further appreciation and elimination of additional income tax liability remains a real possibility for most individuals who did Roth conversions two years ago.
  2. Roth IRA not subject to required minimum distribution (RMD) rules. Roth IRA beneficiaries may continue to extend the life of Roth IRA assets with one difference: they are required to take annual minimum distributions beginning the year following the year of the original owner’s death.
  3. Reduced exposure to RMDs for remaining traditional IRAs. When you do a partial Roth IRA conversion, you reduce your exposure to RMDs on any remaining traditional IRAs. 

See Robert Klein, No Bargains on Roth IRA Conversions this Friday, Market Watch, Nov. 25, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.


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