This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Confusion About Roth IRAs Abounds

BOSTON ( TheStreet) -- The government's upcoming repeal of income caps for Roth IRAs could help rich Americans cut taxes on retirement savings, but few investors realize it.

Beginning Jan. 1, people who make more than $100,000 will be able to move assets into Roth accounts for the first time since the investment vehicles were created 10 years ago. Almost nine out of 10 investors are unaware of the opportunity, according to a Fidelity Investments survey of 800 retirement plan owners released last week. Half of the survey participants reported household incomes of more than $100,000 a year.

Unlike assets in traditional IRAs, money held in Roth accounts grows tax-free. Post-retirement withdrawals also aren't taxed. The downside is that investors don't reap the tax deductions of traditional IRAs.

Lifting income limits will make it easier for affluent investors to convert assets from traditional accounts and 401(k) plans to Roth IRAs. The government will tax the assets, but the hit can be spread over two years.

Among those questioned by Fidelity, 55% were considering a Roth IRA conversion, but only 7% planned to shift assets in the near future. Many said they were unaware of the process, with one-third saying they didn't understand a Roth conversion's tax implications.

When asked whether contributions are tax deductible, 28% answered incorrectly. Twenty percent didn't know that assets in Roth accounts aren't taxed, and 32% didn't know that funds can be withdrawn tax-free after age 59 1/2. More than half didn't realize Roth funds could be used for first-time home purchases and college costs.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $125.49 -0.70%
FB $82.93 -0.32%
GOOG $553.02 0.18%
TSLA $191.22 0.34%
YHOO $44.88 -0.16%

Markets

DOW 17,876.38 -99.93 -0.56%
S&P 500 2,078.29 -7.95 -0.38%
NASDAQ 4,925.8950 -21.5460 -0.44%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs