Nov 09

Conversion Confusion

“Complaints and confusion often surround the notion of ‘reversing’ a Roth IRA conversion,” says the new statement from Equity Trust Company. The company goes on to explain what such a reversal entails. “The popularity of Roth IRA conversions has grown since 2010, when the income requirements that limited who could convert from a Traditional IRA to a Roth IRA were lifted. But just as the popularity in these conversions increased, so did the confusion around the little known strategy of re-converting back to a Traditional IRA from the Roth IRA.”

This confusion arises from a lack of knowledge about IRS rules.  Typically, you have until the due date for filing your federal tax returns, which after extensions is October 15, to “test out” your Roth conversion.  Converting from a traditional to a Roth IRA is a taxable action.  In some cases, your Roth IRA’s value decreases after the conversion and therefore your tax bill may be higher in relation to your account.

Continues the Equity Trust Company statement, “For example, an account that is worth $10,000 on May 1 is converted to a Roth IRA, but because of market changes, the account is only worth $8,000 on September 15. That person will be liable for tax on the $10,000, and in this case, the person might want to reverse course back to his or her Traditional IRA. There would still be an opportunity to redo the conversion if the market again changes, but that person cannot reconvert in the same year as of the conversion and the waiting period between undoing the conversion and redoing it must be at least 30 days.”

So before doing a conversion for next year, get all the information you need from the tax experts at the IRA Financial Group today.  Give us a call at 800.472.0646 today and don’t forget to follow us on Twitter @BergmanIRA!

Nov 07

Self-Directed IRA Could Help Hurricane Sandy Victims Pay for Storm Damages

Adam Bergman, Esq., a tax attorney for the IRA Financial Group, the leading facilitator of self-directed IRA LLC retirement structures, believes that the self-directed IRA structure could be a valuable for solution for victims of Hurricane Sandy. “With IRA Financial Group’s self-directed IRA structure, people can use their retirement funds to lend certain family and friends money in order to help pay for some of the damages caused by the storm while at the same time benefiting their retirement account, “ stated Mr. Bergman. “We have began to see people from the northeast calling and asking whether they could use their retirement funds to help pay for repairs needed due to Hurricane Sandy, “ stated Maria Ritsi, a senior paralegal with the IRA Financial Group.

The Internal Revenue Code does not describe what a self-directed IRA can invest in, only what it cannot invest in. Internal Revenue Code Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain type of transactions. The purpose of these rules is to encourage the use of IRAs for accumulation of retirement savings and to prohibit those in control of IRAs from taking advantage of the tax benefits for their personal account. In general, one cannot use retirement funds and engage in a transaction with a “disqualified person”. A “disqualified person” is defined as the IRA holder and his or her lineal descendants (parents, children, spouse, daughter-in-law or son-in-law or any entity controlled by such persons.) “Therefore, an individual can use a self-directed IRA and lend funds to a sibling, cousin, aunt, uncle, friend, neighbor or colleague in order to help that person pay for some of the storm related damages caused by Hurricane Sandy, “stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate tax-free and without custodian consent!

To learn more about the IRA Financial Group please visit our website at or call 800-472-0646.

Nov 06

Contribute, Convert & Collect on Roth accounts

This is the motto from Ed Slott’s new book, “Fund Your Future”.  Slott is one of the country’s foremost experts on IRA plans.  He says young people should fund Roth IRAs and Roth 401(k)s rather than traditional 401(k) and IRA plans.  “The core message of the book,” said Slott, “is that greatest moneymaking asset any individual can possess is time. And young people have more of it than anyone else and they should be capitalizing on that.”

As you probably know, Roth plans are funded with after-tax money and distributions are tax-free provided basic restrictions are met.  Traditional plans are funded with pre-tax earnings and you pay ordinary income taxes when you withdraw.

There are two main benefits for contributing to a Roth.  First, you may withdraw your contributions at any time and for any reason.  We all agree that it’s not a great idea to take any money from your retirement savings, but if you absolutely need the money (say for a deposit on a house), the money is available to you.  This will put a lot of minds at ease.  Secondly, there are no required minimum distributions in a Roth.  If you don’t need the money when you hit age 70 1/2, then you don’t need to use it.

One reason why Slott recommends that young workers use Roth accounts instead of traditional tax-deferred accounts has to do with tax rates. “Young people haven’t hit their earning’s and saving’s prime yet,” Slott said. “So, the deduction is worth less, if you are making less.”  He does recommend investing in an employee sponsored plan at least until you reach your employer’s full match.

Slott also talks about Roth conversions.  Tax-free is always better tan tax-deferred.  When you do convert, you need to pay the income tax on the pre-tax money you convert.  Slott recommends using cash or capital gain assets to pay for the conversion.  If you can’t convert all at once, convert over time with money you can spare.

Finally is “collect”.  Yes, “the distribution rules are complicated if you tap Roth money early,” Slott writes in his book. “But the same is true of traditional IRAs—except it’s much more expensive to get at your traditional IRA money because you have to pay the income tax on the deferred amount on top of a 10% penalty (for withdrawals before age 59½.)”

To read the full story, check it out here and check out more of Ed Slott here.  The tax experts at the IRA Financial Group are waiting to hear from you with any questions you have about Roth retirement plans.  Call them today at 800.472.0646

Nov 06

Surviving Sandy

Hope all is well with everyone after Hurricane Sandy.  I’m in Jersey myself and lost power until Saturday, but we made it through with just a little inconvenience, others weren’t so lucky.  The IRA Financial Group sends out their best wishes for those who have lost so much.  Please, if you can, donate to the Red Cross at  Every little bit helps!

Don’t forget to get out there and vote today!