Today TaxMama® hears from Yazminia in the TaxQuips Forum with an apt question (rephrased). “I am over age 59 ½ and want to transfer money from my IRA to my Roth IRA tax-free. Based on my income level, how much may I transfer without generating taxes?”
The reason I wanted to bring this to your attention is – I first stumbled across this issue several years ago when a tax pro’s client was being audited for his very high medical expenses. This man was paying for 24-hour in-home care for his mother, and for in-home care for himself to the tune of $50,000. This resulted in a huge loss on his tax return.
Meanwhile, Wally was sitting on over half a million dollars in a 401k plan from which he could have been drawing approximately $40,000 per year, tax-free for at least the last 4 years before I met him. We started him on that program immediately.
I would like each of you who is over age 59 ½, sitting on IRAs and/or retirement accounts, and filing tax returns with very low income, or losses, to look at your tax situation before year-end. It is quite possible that you can move $5,000 or more to a Roth IRA – or even to your own bank account without paying a dime in taxes. Or…to draw out a little more money with only a 10% tax rate.
With tax rates rising next year, this may be one of the wisest moves you can make.
Wally died about two years later with over $300,000 still sitting in his 401k. 100% of that money was taxable to his heirs. Let’s not have that happen to your family. OK?
And remember, you can find answers to all kinds of questions about retirement accounts and other tax and business issues, free. Where? Where else? At www.TaxMama.com.
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