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Posts Tagged ‘traditional IRA’

A traditional IRA is tax-deferred until withdrawal

If you’ve been a diligent saver and keeping an eye on your 401(k) for all these years, it’s important to remember that the tax-man also has been looking on with interest and waiting for his cut. It’s simply too easy to forget, but a traditional IRA is tax-deferred until withdrawal, so that balance is deceiving. What is more, it means that the tax you will owe has yet to be decided. A recent MarketWatch article points out the strong possibility of higher tax rates for 401(k) savers once they reach retirement. The value of delaying a tax hit into retirement,…

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After all the hoopla around Roth conversions in 2010, now is the time to consider whether or not a re-characterization is in your future..

If you made a Roth IRA conversions last year (when all the media were encouraging you to do so), you may rue your decision now that tax time has arrived.  Forbes recently ran a reminder that it’s not too late to undo your conversion decision.   You can still “re-characterize” the conversion and put the money back in your traditional IRA, as if nothing had ever happened. But why re-characterize? Here is the example Forbes used: Let’s say you converted $100,000 to a Roth IRA in 2010 and you are ready to pay the tax on your 2010 return (you elected…

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