Converting dollars from a Traditional IRA to a Roth IRA may or may not be an option for you, depending upon your circumstances. Why bother with considering a Roth IRA conversion? A number of points should be considered.

• If a Traditional IRA is converted to a Roth IRA, the cash needed to pay the taxes due should be available from sources other than the IRA. Taking the cash from the IRA reduces the amount of cash available to grow toward retirement. Also, if the taxes paid on the conversion are paid with IRA assets, that amount is treated as a distribution and could be subject to income tax and will be subject to a 10% IRS penalty if the owner is under age 59 ½.

• An additional idea to consider regarding taxes concerns withdrawals. Once a conversion occurs, if the assets are held in a Roth IRA for 5 years or age 59 ½ is reached (whichever comes first), it is possible to take penalty free withdrawals on the converted amount. Each converted amount is subject to a separate 5 year time period.

• Another important difference between Traditional IRAs and Roth IRAs is that there are no required minimum distributions for Roth IRAs as exists for Traditional IRAs. Because Roth IRAs are not subject to mandatory distributions, the assets in Roth IRAs can grow tax free until the owner decides to take withdrawals.

• For those who plan to leave their IRAs to heirs, Roth IRAs have other advantages over Traditional IRAs. Those who bequeath Roth IRAs to their beneficiaries reduce the amount of their taxable estates because of the income tax already paid. In addition, like Traditional IRAs, people who inherit IRAs must make annual withdrawals from the accounts. However, because the tax has already been paid on the inherited Roth IRAs, beneficiaries of Roth IRAs owe no income tax on their withdrawals.

• Traditional IRAs with depressed values can be advantageous to convert to Roth IRAs. The current depressed value will be taxed at conversion and the assets in the Roth IRA will grow tax free (if qualifications are met).

• Current tax brackets and future tax brackets should be taken into account. Paying taxes at a lower rate at conversion than at a higher rate when assets are withdrawn should be evaluated when considering converting IRAs.

Roth IRA conversions can be a great opportunity, but conversions are not right for everyone. You'll probably want to review our article on the Roth IRA conversion rules that take effect in 2010. Keep in mind that each person’s situation is unique and a decision should be made after consultation with financial and tax advisors. To learn more about positioning yourself to achieve your future goals, please contact REDW Stanley Financial Advisors today at 505.998.3200.

This information is brought to you by REDW Stanley Financial Advisors LLC, an SEC registered subsidiary of REDW The Rogoff Firm.

We anticipate that you will be bombarded by articles and by experts extolling the virtues of the change in Roth IRA conversion rules that take effect in 2010. To determine whether it makes financial sense for you to convert, there are many factors to consider, and each person’s circumstance is unique. Nevertheless, given the changes in the rules, it seems prudent to discuss the changes in the Roth rules to determine whether a Roth IRA conversion is an option for you.

Because of the change to the tax rules in 2010, more people will have access to a Roth IRA, an excellent tool for accumulating retirement assets. But it is important to keep in mind what did change and what did not change.

What did not change are the income limits for contributing to a Roth IRA. Those income limits, a modified gross income for individuals of $120,000 or $176,000 for couples, remain the same in 2010.

However, what did change are the income limits for transferring money from a Traditional IRA to a Roth IRA, a process known as conversion. Beginning in 2010, Uncle Sam eliminates the income limits for converting dollars from a Traditional IRA to a Roth IRA. That is good news, but there is a caveat to consider when converting dollars from a Traditional IRA to a Roth IRA and that involves income tax.

When dollars are withdrawn from a Traditional IRA, income tax is due on those dollars. So anyone who is willing to pay the income taxes when converting dollars from a Traditional IRA to a Roth IRA can move assets to a Roth IRA. But in 2010, the IRS offering taxpayers who convert dollars to a Roth IRA the option of reporting the total amount converted on their 2010 tax return or dividing the taxes due and paying them equally on their 2011 and 2012 tax returns.

An important idea to keep in mind is that under current law there are no taxes due on the earnings that accumulate within a Roth IRA. Please notice that the emphasis given to under current law. Because earnings are tax free, there are no taxes due on any withdrawal from a Roth IRA as long as the withdrawal occurs 5 years or more after conversion. It does require some amount of faith that the government will not change the tax laws between now and when you might begin to withdraw dollars from your Roth IRA. History does demonstrate some reasons to consider this possibility. Until 1983, Social Security was not taxable to recipients; now up to 85% of Social Security benefits can be taxed. Until the 1990’s, municipal interest was not subject to taxation; now certain municipal interest is subject to alternative minimum tax. Deductibility of mortgage interest has changed; now it is subject to certain limitations. It is difficult to predict the future but in the face of rapidly rising government deficits, so it is wise to consider the prospect of a tax law change.

If you're considering converting a traditional IRA to a Roth IRA, you'll want to read our post on the topic, which has some important points to consider before making the switch. To learn more about positioning yourself to achieve your future goals, please contact REDW Stanley Financial Advisors today at 505.998.3200.

This information is brought to you by REDW Stanley Financial Advisors LLC, an SEC registered subsidiary of REDW The Rogoff Firm.

After reviewing nominations of the best financial advisors to doctors from around the country, Medical Economics selected Ginny Stanley of REDW Stanley Financial Advisors LLC, an SEC registered subsidiary of REDW The Rogoff Firm, as one of the 150 Best Financial Advisers for Doctors. Ginny was the only financial advisor in New Mexico to make the list.

Selections were based on five criteria areas:

• KNOWLEDGE AND EXPERIENCE
• GEOGRAPHY
• FEE ARRANGEMENTS
• MINIMUM PORTFOLIO
• GOOD STANDING

The REDW team congratulates Ginny on being the only financial advisor in New Mexico to be selected for this list. If you're a doctor in New Mexico, well, now you know who to call to learn more about positioning your portfolio to achieve your future goals. You can reach Ginny by contacting REDW Stanley Financial Advisors at 505.998.3200.

This information is brought to you by REDW Stanley Financial Advisors LLC, an SEC registered subsidiary of REDW The Rogoff Firm.

Carl Alongi, CPA/ABV, the co-founder of one of Albuquerque's largest certified public accounting and business consulting firms, has joined REDW The Rogoff Firm - New Mexico's largest, locally owned firm of CPA's and business & financial advisors, and a growing regional player throughout the Southwest.

"The wealth of knowledge that Carl has developed over the last 40 years in the areas of business valuation, business planning and management, tax, and litigation support provides a tremendous amount of value for our clients" notes Ron Rivera, REDW's Managing Principal. "Plus, Carl's longstanding commitment to community involvement ties in nicely with a cornerstone of REDW's core values.

Carl currently serves on many local boards of directors, including: University of New Mexico Foundation, Central New Mexico Community College Foundation, Albuquerque Academy Board of Trustees and CPA Mutual Insurance Company.

"In recent years, I've been focusing on financial investment advising, and REDW has a strong wealth management group that complements this area of interest," added Carl.

In addition to wealth management, Carl will continue providing clients with business valuation and litigation accounting services.

Diversification using asset allocation is an important tenant of REDW Stanley’s investment process. We use modern portfolio theory to construct the best portfolio for each client’s goals and objectives and risk tolerance. We use a number of different asset classes to achieve diversification. Allowing asset allocation to work over a market cycle is one key to successful investing.

To illustrate this point, see the difference asset allocation can make for an investor who began with an investment of $10,000 and maintained their asset allocation over the time period from December 31, 1983 to December 31, 2008:



Chart Source: Ned Davis Research, 12/31/08. These charts are for illustrative purposes only and do not predict or depict the performance of any investment.

Thinking long term during a difficult market cycle is contrary to human nature, but this challenging market cycle will pass. Time and opportunity are basic precepts of asset allocation. Fear and greed are powerful human emotions. Our role is to help you navigate through these challenging times and to act rationally and logically. Turn off the TV and look forward. Reevaluate your risk tolerance and, if necessary, your asset allocation. Try to think in terms of years. It is hard to do, but positioning your portfolio correctly now can contribute to achieving your future goals and objectives.

To learn more about positioning your portfolio to achieve your future goals, please contact REDW Stanley Financial Advisors today at 505.998.3200.

This information is brought to you by REDW Stanley Financial Advisors LLC, an SEC registered subsidiary of REDW The Rogoff Firm.