ACCOUNT TYPE
Roth Conversions
A Roth IRA affords a unique opportunity to enjoy tax-free distributions while investing in the alternative assets of your choosing.
A Roth IRA affords a unique opportunity to enjoy tax-free distributions while investing in the alternative assets of your choosing.
By paying taxes on your contributions and waiting an appropriate amount of time, distributions of Roth IRA earnings can be 100% tax free. Roth conversions allow you to “switch” your account type from Traditional to Roth by adjusting the tax situation of your plan.
There are no limits on the number of Roth conversions you may execute, nor are there limits on the dollar amounts you may convert.
You’re under no obligation to liquidate your pre-tax assets prior to conversion. Assets may be converted in kind through retitling or other simple transfer procedures. The current fair market value of your converted assets will be reported as the taxable amount.
For example, if you convert a 1 oz. gold bar with a spot price of $1,300, that’s how much will be added to your income for tax purposes even though the physical item was never sold.
You must wait five years before distributing converted cash or assets if you want to garner the full tax-free benefits of Roth IRA withdrawals. This waiting period applies even if you’re already 59½ years old and it’s been at least five years since your first Roth contribution.
Until recently, self-directed investors who converted their accounts had the option of re-characterizing their holdings back to a pre-tax status. This is no longer the case per the Tax Cuts and Jobs Act of 2017.
