Dear Valued Clients,

During our current market times, I feel that adopting a different methodology to managing investments may be strategic. I take individualized approaches to planning, distribution, and managing for all my clients. Similarly, it may be beneficial for those who can afford to switch to consider the possibility of a Roth conversion. A Roth conversion is a taxable movement of cash or other assets from a Traditional SEP, SARSEP, SIMPLE, or Rollover IRA to a Roth IRA. I would never recommend full conversion of your assets because of its unavailability for 5 years, and a Roth conversion cannot be reversed once it is initiated. However, for those who may be able to invest long term in this type of retirement plan, the benefits of this type of conversion could be great — especially while the market is in its current state.

Moving funds from a Traditional IRA to a Roth has benefits such as (1) avoiding Required Minimum Distributions. Currently, when you turn 72, we have to distribute a portion of your retirement account to you. In a Roth IRA, it is not subject to RMDs. (2) If the Roth IRA is left alone for 5 years, none of the growth or distributions will be taxed. This allows you to transfer them to heirs without them having your tax burden. The main reason I am considering this tactic, at this time, is because of the low point in the market. Say, for an example, your account was worth $100,000 last month, but because of the current market it has dropped to $50,000. If we move the stocks over to a Roth you will pay taxes on the $50,000, but when the market returns to the levels of last month and the stock recovers theoretically to $100000, you will not pay taxes ever on the $50,000 recovery. It is a perfect time to consider this strategy.

I’d be happy to answer more questions regarding Roth conversion and other investments questions you may have during this time. As always, my clients, you are my priority. I value the trust you have in me and am honored to be your advisor.

Eileen Cure – President, CPA, PFS