Tax Break for IRA Conversion Lured 10% of Millionaires – Bloomberg 01-03-14

Salient to Investors:

The IRS said conversions from regular IRAs to Roth retirement accounts increased more than nine times in 2010, rising to $64.8 billion from $6.8 billion in 2009, and the first time Roth conversions were greater than contributions. More than 10 percent of IRA holders with annual incomes exceeding $1 million converted.

A 2006 law set 2010 for ending a $100,000 income limit on Roth conversions, with no ceiling on conversions if an investor has multiple IRAs and no cap on the amount that can be shifted.

Thomas Rowley at Invesco said wealthy investors could better manage their tax liability in retirement and pass the Roth accounts to heirs free of income tax – it is the cheapest estate planning you can find and you are paying the taxes for these beneficiaries.

Read the full article at http://www.bloomberg.com/news/2014-01-03/tax-break-for-ira-conversion-lured-10-of-millionaires.html

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The IRS said conversions from regular IRAs to Roth retirement accounts increased more than nine times in 2010, rising to $64.8 billion from $6.8 billion in 2009, and the first time Roth conversions were greater than contributions. More than 10 percent of IRA holders with annual incomes exceeding $1 million converted.

A 2006 law set 2010 for ending a $100,000 income limit on Roth conversions, with no ceiling on conversions if an investor has multiple IRAs and no cap on the amount that can be shifted.

Thomas Rowley at Invesco said wealthy investors could better manage their tax liability in retirement and pass the Roth accounts to heirs free of income tax – it is the cheapest estate planning you can find and you are paying the taxes for these beneficiaries.

Younger Seniors Are Burning Up Their IRAs – Bloomberg Businessweek 05-16-13

Salient to Investors:

The Employee Benefit Research Institute said:

  • 48 percent of people who were aged 61 to 70 and in the bottom half of the income distribution withdrew substantially from their IRAs annually during 2002-10, along with 29 percent of people in the top quarter of incomes who were aged 61 to 70 – withdrawals ranged from 12 percent of funds for young seniors in the top quarter of incomes to 17 percent for those in the bottom quarter.
  • Older seniors (aged 71 and up) appeared to be more frugal, with many withdrawing just the minimum.
  • 32 percent of people aged 71 to 80 saved at least some of their IRA withdrawals, versus only 11 percent of those 61 to 70.
  • 80 to 90 percent of people in their 80s took only the required minimum distribution.

Sudipto Banerjee at EBRI said it was impossible to tell whether the same or different people were withdrawing money from their IRAs year after year.

Read the full article at http://www.businessweek.com/articles/2013-05-16/younger-seniors-are-burning-up-their-iras#r=rss

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How to Handle Inherited IRAs – AARP 10-05-12

Salient to Investors:

Anyone holding an IRA or 401(k) should leave a note explaining the importance of retitling if you want your heirs to get as much tax deferral as they can from the money you leave them. The best strategy for heirs is to leave as much money as possible in the inherited IRA account.
 
If you are under 59-1/2, you can avoid the 10% withdrawal penalty by retitling the account as an “inherited IRA – for example “John Jones IRA (deceased Aug. 1, 2012) for the benefit of Mary Jones, beneficiary.”
 
When you reach 59-1/2, retitle the account again in your name alone: which defers any further withdrawals until you reach 70-1/2. Otherwise withdrawals must start when the late spouse would have reached 70-1/2. 
 
For inheritors who are not spouses, each retitles their account share as an “inherited IRA.” For example, say John Jones leaves his IRA to his daughter, Joan.
 
If you inherit a 401(k), retitle it as an inherited IRA. Correct titling is critical,  

Read the full article at http://www.aarp.org/money/investing/info-10-2012/how-to-handle-inherited-iras.html