Retirement Planning- 9 Roth Conversion Rules

Question 1

Can distribution strategies at death (stretch IRA) be used by any traditional or Roth IRA owner? (Yes or No)

Answer 1

Yes

Question 2

If a Roth IRA is held for ________ years, distributions are tax-free at death

Answer 2

5

Question 3

Do some qualified plans allow a Stretch option? (True or False)

Answer 3

True

Question 4

Depict some of the benefits of distribution strategies at Death in a stretch IRA

Answer 4

Can select primary and contingent beneficiaries
* Can choose a designated revocable or irrevocable trust as
beneficiary (but be certain trusts will qualify!)
* Can have one IRA with multiple beneficiaries (IRS Private
Letter Ruling 2005370440) and split after death

Question 5

Which converters (Young-65 vs. Old-80) are more likely to see the advantage of Roth during their lifetime?

Answer 5

Young (65)

Question 6

True or False: With enough time, Roth scenario will produce
larger total value regardless of owner’s tax rate

Answer 6

True

Question 7

True or False: Lower owner MTB produces fewer overall assets
in Roth over time, but with larger advantage over
non-Roth

Answer 7

False: Higher owner MTB produces fewer overall assets
in Roth over time, but with larger advantage over
non-Roth

Question 8

True or False: Lower owner MTB produces larger overall assets
in Roth, but smaller advantage over non-Roth

Answer 8

True

Question 9

What is more beneficial to the beneficiary?- Traditional or Roth?

Answer 9

Roth

Question 10

What are the advantages of this scenario?: Account owner converts IRA to a Roth IRA, paying the tax on behalf of beneficiary

Answer 10

• Retired owner may be in a lower tax
  bracket than beneficiary
• Owner avoids future RMDs on converted
  amount
• Account grows tax-free after conversion
• Beneficiary can delay withdrawals until
  tenth year, maximizing tax-free growth