Solution for Retirement

The smart way to convert IRAs to Roth IRA
Many retirement investors are quite aware of the tax advantages of the Roth IRA over the standard IRA. Normally, withdrawal of IRA monies, just like other qualified investments such as 401(k)s, 403(b)s, or 457s, and generates taxation, and the withdrawal is taxed as ordinary income, not capital gains. With Roth IRA funds, since they involve already taxed investments, are not taxed at withdrawal, whether by the original investor or a beneficiary thereof. In particular, there is no tax levied on the gains made over the years since the original establishment of the Roth IRA. Because of the potential value of this vehicle, the concept has been applied to 401(k) and 403(b) investments. For all these reasons, one would assume that this theoretically beneficial approach would be adopted by most retirement investors. And yet this has not been the case. Why?

In addition to the fact that there is no tax advantage in the current year of the investment, opportunities for multiyear conversions have not been taken as frequently as one might assume. The reason for this is that all the monies converted must be taxed in the year of the conversion. This would constitute a major burden on most retirement investors. Moreover, most annuities are "single premium" or fixed at the point of original transfer; they rarely provide opportunity for "flexible premium" or multiyear contributions.
By spreading the transfer over numerous years, it wou ld be possible to minimize the tax burden at the front end of the conversion. For most persons interested in the conversion of multiyear IRA assets, neither they, nor their financial advisors, are aware of the opportunity for reduced taxation at the initiation of transfer by the use of a "flexible premium" annuity.

At Retirement Nest Egg Services, we have carefully researched the indexed annuity offerings of many companies and have found one company in particular, American Equity, that offers the opportunity for multiyear contributions, 10 years of the conversion/transfer.

We Believe that this multiyear approach to have minimal tax impact in the first year of the conversion/transfer is so valuable in reducing tax burdens to the investor that we recommend this particular indexed annuity from American Equity, in all cases in which the investor because of their age can take advantage of spreading the conversion over as much as 10 years. If there is a considerable client hostility to taxation, and then consideration of conversion is initially focused on the use of the American Equity annuity. If a prospect is interested in this approach, then it is highly appropriate to explore this possibility with our professional staff