Chris Russen
Annuity Sales Consultant

Partial Roth conversions can be a tool to create tax diversification in your client’s retirement income or legacy planning. By setting up a plan with pre-tax funds in the right tax environment, this can allow your clients to pay less in taxes over time. By using full or partial conversion a client may take advantage of a favorable tax bracket. Using a strategy like this may lower a client’s taxable income and limit exposure to higher tax rates in retirement years.

As we all know with Roth IRAs the client does not need to take RMDs. Since they will not be taking RMDs in retirement years they have decreased future tax liabilities and maintain a higher nontaxable account balance to pass to beneficiaries.

There are many different factors to consider with this strategy; here are some important ones to remember.

  • Roth Conversions (Full or Partial) will be a current taxable event.
  • Roth Conversions cannot be undone once the conversion has been placed.
  • If the client is under 59 ½ the conversion will be a taxable event and incur a 10% early distribution penalty.
  • If the client is over 59 ½ they must wait 5 year after each individual Roth conversion to take a distribution.

If you think this strategy would work for your client, please give us a call. We are here to help with all your clients Fixed and Indexed annuity strategies. 419-473-2323