Article Date:
May 2020

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COVID-19 Crisis Creates Silver Lining for Roth IRA Conversions

For years, tax advisors have lectured about the wonderfulness of Roth IRAs and why you should convert traditional IRAs into Roth accounts.


But, of course, you didn’t get around to it. In hindsight, maybe that was a good thing.


For many, the financial fallout from the COVID-19 crisis creates a once-in-a-lifetime opportunity to do Roth conversions at an affordable tax cost and also gain insurance against future tax rate increases.


This article explains why. But first, some necessary background information. Here goes.


Roth IRAs Have Two Big Tax Advantages


Let’s quickly review them.


Tax-Free Withdrawals


Unlike withdrawals from a traditional IRA, qualified Roth IRA withdrawals are federal-income-tax-free and usually state-income-tax-free, too.


What is a qualified withdrawal? In general, the tax-free qualified withdrawal is one taken after you meet both of the following requirements:1



You had at least one Roth IRA open for over five years.


You reached age 59½, became disabled, or died.


To meet the five-year requirement, start the clock ticking on the first day of the tax year for which you make your initial contribution to any Roth account. That initial contribution can be ... Log in to view full article.

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