Tax Planning For Roth

Question 0

Which of the following is a financial benefit of Roth IRA/Roth conversions?

Tax rate arbitrage (only if current owner’s personal tax rate is lower than their future expected personal marginal tax rate)

Tax free growth for assets with high appreciation potential

Tax free growth of otherwise taxable side account funds used to pay conversion taxes

Hedge against rising tax rates

Tax diversification

Greater control of retirement income by elimination of RMDs

Possible reduction/avoidance of Unearned Net Investment Income Tax

Possible reduction/avoidance of IRMMA.

Reduced chance of AGI based deductions

Answer 0

All of the above

Question 1

T or F - A Roth conversion is beneficial even if the current tax rate is the same as the retirement tax rate assuming the taxes for the conversion are paid with separate funds

Answer 1

True. This in large part due the conversion of taxable side account monies to tax free.

Question 2

What possible benefits accrue from reducing RMDs by use of Roth conversions?

Answer 2

Avoid bracket creep due to rising RMDs

Reduce risk of next Investment Income tax of 3.8%

Reduce risk that rising AGI due to rising RMDs will cause deductions to phase out

Greater control of distribution strategy by reduction of forced distributions (RMDs)