Description
Book SynopsisIn essence, a Roth IRA conversion requires paying taxes on the portion of your IRA or 401(k) that you convert, but then that money can grow income tax-free for the rest of your, your spouse’s, your children's and grandchildren's lives. The advantage of a tax-savvy long term Roth IRA conversion is often measured in the millions. The real eye-opener, however, is that Roth IRA conversions are great for older IRA owners, regardless of the benefits to future generations.
"The Roth Revolution" addresses the following topics clearly and objectively:
* Whether, how much, and when to convert
* Costs and benefits of a Roth IRA conversion
* Advice for taxpayers in each income tax bracket
* The impact of future tax increases
* Synergy of delaying (or returning) Social Security and Roth IRA conversions
* Combining charitable gifts and Roth IRA conversions
* Tax-free conversions of after-tax dollars in IRAs and retirement plans
* Converting and recharacterizing strategies
You may be asking, “Who in their right mind would pay taxes before they have to?” The answer is James Lange and thousands of his readers and clients, all the top IRA experts, and after reading "The Roth Revolution", hopefully you too.
Trade Review“There are few advisors as IRA-knowledgeable as Jim Lange. "The Roth Revolution" is chock full of creative Roth IRA planning ideas to help every client.”
-- Natalie Choate, Esq. Author, Life and Death Planning for Retirement Benefits (6th Edition)
"In The Roth Revolution, Jim clearly explains the remarkable advantages of Roth IRAs and their role in estate planning. Everyone considering conversions of traditional IRAs to Roths should read this book.”
-- Burton G. Malkiel, Princeton University, Professor of Economics. Author, A Random Walk Down Wall Street (Tenth Edition)
“Looking to protect your money? Read Jim Lange’s The Roth Revolution—and you could make your financial life a whole lot less taxing.”
Jonathan Clements
Author, The Little Book of Main Street Money
Former Personal Finance Colomnist, The Wall Street Journal
“An amazing, comprehensive explanation of the hows and whys of Roth IRAs with real life examples unlocked by Jim Lange who has set a new standard in retirement tax planning.”
Diane McCurdy, CFP
Best-Selling Author of How Much is Enough?”
Table of ContentsWhat’s New
New Tax Law #1
New Tax Law # 2
New Tax Law # 3
New Tax Law #4
New Tax Law #5
Oldies but Goodies, Classic Concepts Regarding Roth IRA Conversions
Special Notes to the Reader Regarding Several Technical Issues
The Use of the Phrase “Measured in Purchasing Power”
Journalistic Accuracy Comment
Investment Rate
Topics that are Not Covered in The Roth Revolution
Roth IRA Conversions and Non-traditional Investments
Planning for Long-Term Care
Chapter One : Roth IRA Conversions and the Dream of Tax-Free Income for Generations
A Quick Review of Traditional Tax Planning
The Roth IRA Conversion Rationale
The Secret--Measuring Wealth Using Purchasing Power Instead of Total Dollars
The Simple Math (Arithmetic) Behind the Secret
Chapter Two: Measuring the Benefits of a Roth IRA Conversion
Measuring the Benefits of Your Roth IRA Conversion for your Children and Grandchildren Why You Will Likely Die with a Roth IRA
The Unique Features of an Inherited Roth IRA
What Happens if You Die and Leave Your Roth IRA to the Next Generation?
Chapter Three: Measuring the Benefits of Roth IRA Conversions in Light Of Two New Tax Increases Children of High Income IRA Owners
The Benefits of Roth IRA Conversions to the Third Generation of High-Income Taxpayers Are these Pie in the Sky Projections of the True Value of a Roth IRA Conversion to Your Family? Summary of New Effective Tax Rates Comparing 2010 with 2011 Rates and 2013 when Health Care Reform Takes Effect
The Benefits of a One-Million-Dollar Conversion
The Next Generation of a High Income Tax Bracket Family Converting $1M The Benefits to the Grandchildren of Mr. Roth IRAs $1M Conversion
The Reduced Estate and Inheritance Taxes Associated with a Roth IRA Conversion
Chapter Four: A Deathbed Roth IRA Conversion Story
Chapter Five : My Roth IRA Conversion Story: How I Got Started with Roth IRA Conversions My Roth IRA Conversion Story
A Roth IRA Conversion Douses the Impact of a Devastating Fire
Subsequent Events
Chapter Six: The Three Buckets of Money Story
Chapter Seven: Typical Roth IRA Conversion Advice: It Is Not Usually Advantageous to Convert the Entire IRA 2010 Tax Rates for Married Filing Jointly
What Happens if Your (or Your Heirs’) Tax Rate Will Change?
A Surprising Pattern of Over-Converting if You are Over 70
The General Concern about Raising Tax Rates
What About Changes in the Tax Law that Could Make a Roth IRA Conversion Disadvantageous?
What if You Don’t Have the Money to Pay the Tax on the Conversion from Outside the IRA? Illustration of the Extreme Situation when there is No Money to Pay the Tax on the Conversion
Chapter Eight: How Much and When You Should Convert to a Roth IRA
Roth IRA Conversion Software
How to Calculate How Much Money You Should Convert to a Roth IRA Using a Comprehensive Analysis What Assets Are You Allowed to Convert to an IRA?
Story--Kevin & Debbie Smith: Married Couple in Mid-60s
Biography
Analysis, Discussion and Recommendation
Gifting Recommendations
Estate-Planning Documents
In the Final Analysis...
Chapter Nine: Converting Non-deductible IRAs and After-Tax Dollars in Retirement Plans without Having to Pay Any Taxes Converting Non-deductible IRAs to Roth IRAs
After-Tax Dollars inside Your Retirement Plan
After-Tax Dollars Inside Your IRA
How to Qualify to Make a Tax-Free Roth IRA Conversion If You Have Both After-Tax and Pre-Tax in Your IRA For Readers Who Are Still Working and Also Have a Non-deductible IRA
What If You Are Retired?
Roth IRA Conversions of After-Tax Dollars in Your Retirement Plan if You Are Still Working Active Employees Making Ongoing IRA and Retirement Plan Contributions The Reporting and Accounting of After-Tax Dollars Inside Your IRA and Retirement Plan
Chapter Ten: An Aggressive Strategy--The Roth Launcher--Recharacterizing or Undoing a Roth IRA Conversion The Problem This Strategy Solves
Hedge Your Bets
Do You Really Have to Segregate Your Roth IRA Accounts?--Yes!
An Example of the Wrong Way to Do It
Rules Governing Recharacterizations
Procedure for Re-characterizing a Converted Roth IRA Back to a Traditional IRA Multiple Roth Conversions and Recharacterizations
The Amount Recharacterized Differs from the Conversion Amount
Case Study: Roth IRA Conversion Made in Year
Pitfalls of Option 4
Time Line for Converting to a Roth IRA and Then Recharacterizing Back to a Traditional IRA Year One
Year Two
The November Shuffle--The Really Advanced Convert and Recharacterize Strategy
The Mechanics of Filing Your Tax Return with this Horse Bet Strategy
Combining Strategies into One Great Roth Launcher Process
Warning! Warning! Warning! and Disclaimer
The Epiphany of the Aggressive Strategy with Steve’s “Roth Launcher” Process The Middle Road
Chapter Eleven: The Potential Pitfalls of a Roth IRA Conversion
Don’t Get Me Wrong and Let This Chapter Dissuade You
Investment Risk
Potential Changes in the Tax Law
Risk of the Elimination of the Income Tax
Risk of Lower Tax Rates In the Future
Charitable Beneficiaries
The Risk (or Certainty) of Additional Complication and Paperwork
Story--Vincent & Edith Butler: Sometimes a Roth IRA Conversion Doesn’t Pay Biography
Analysis, Discussion and Recommendation
Chapter Twelve: The Synergistic Strategies of Roth IRA Conversions and Delaying or Even Returning Your Social Security Delaying Social Security and Roth IRA Conversions
Giving Your Social Security Benefits Back
Chapter Thirteen: Specific Advice to Taxpayers in Different Tax Brackets
Zero Percent Tax Bracket
The Ten Percent Bracket
The Fifteen Percent Bracket
The Twenty-Five and Twenty Eight Percent Tax Bracket Readers
The Thirty-Three Percent Tax Bracket Readers
People in the Top Tax Brackets Who are Likely to Remain There
Chapter Fourteen: Times When You Should Spend Your Roth IRA
Roth IRA Useful for Large Single Year Spending Needs
Roth IRA Useful for Smaller Multi-Year Spending Needs
Chapter Fifteen: Roth IRA Conversions and Charitable Beneficiaries
Non-Proportional Beneficiary Designations Adds Value for Heirs and Charities A Common Mistake
Legacy Impact of Combining Charitable Gifts with Roth IRA Conversions
Life Insurance with Charitable Bequests and Roth Conversions
Story--Sarah Wilson: Charitably Inclined Reader
Biography
Analysis, Discussion and Recommendation
The Most Cost Effective Method of Providing for Charity for Senior IRA Owners You Can Deduct a Greater Amount of Large Charitable Gifts by Using your IRA to Help Fund the Gifts Consider Supersizing Your IRA Charitable Gift by Using it to Fund a Life Insurance Policy for Your Charity If You Have After-Tax Dollars in Your IRA, Making IRA Gifts Now Will Make Roth IRA Conversions More Attractive in the Future
Reducing Your AGI through Using your IRA to Make Charitable Gifts Can Have Many Additional Tax Benefits for You
Chapter Sixteen: Roth IRAs, Roth 401(k)s and Roth 403(b)s in the Accumulation Years You Are On Your Own Because Big Brother Can’t Spare a Dime
Basic Roth IRA Information
Roth IRA Eligibility Rules
Traditional IRAs
Roth IRA vs. Traditional IRA
Total Spending Power of Savings Methods
Roth 401(k) Plans and Roth 403(b) plans and the New Contribution Limits What Are These Roth 401(k) and Roth 403(b) Plans?
Special Note for Teachers and Other Municipal Workers
Roth 401(k) vs. Traditional 401(k)
Chapter Seventeen: Estate Planning for Roth IRA Owners
Which Assets Should You Spend First?
What Happens to a Traditional IRA if You Leave it to Your Spouse?
What Happens if You Leave Your Roth IRA to Your Spouse?
What Happens After an IRA Owner Dies and Leaves the IRA to a Non-Spousal Beneficiary? Why Dying with a Traditional IRA is not So Bad
What if Your Child is a Spendthrift?
What Happens if You Leave Your Roth IRA to a “Non-Spouse” Beneficiary? Naming Young Children as Beneficiaries of IRAs and Roth IRAs
The Best Estate Plan for Traditional Married Couples with IRAs and Roth IRAs Estate Taxes
The Cruelest Trap of All
The Best Estate-Planning Solution for Traditional Couples
A Cascading Beneficiary Story
A Cascading Beneficiary Story with a Twist
Second-To-Die Policies for IRA Owners
Variations on Lange’s Cascading Beneficiary Plan
Chapter Eighteen: Roth Conversions Now Possible In 401(k) and 403(b) Plans
The Killer Strategy That Could Make a Tremendous Difference in Many Lives
Chapter Nineteen: Combining Different Strategies
The Combining Different Strategies Story
Paul and Carol’s Family
Paul and Carol’s Financial Situation
Legal Recommendations for Combining Retirement Strategies
Retirement Plan Strategies
Life Insurance Recommendation
Other Gifting Recommendations
Summary of Savings from Recommendations
Appendix
Additional Resources and Reading
About the Author
The Next Step
Services
Speaking
Freebies
