Menu Close

Slide in Stock Market Creating Roth Conversion Opportunities for Self-Directed IRA Investors

Self-Directed Roth IRA offering tax-planning opportunities for depressed stock holding.

IRA Financial Group, the leading provider of “checkbook control” Self-Directed IRA LLC solutions, has seen demand from investors looking to take advantage of Roth IRA conversion opportunities as a result of a depressed stock market. With the S&P 500 & Dow Jones in negative territory as of August 24, 2015, investors are looking for tax planning opportunities. As a result, many retirees are looking to the Self-Directed Roth IRA as a vehicle for generating tax-free gains on future stock growth.

According to Adam Bergman, a tax partner with the IRA Financial Group, a Roth conversion offers a retirement account holder the ability to convert pre-tax funds to a Roth (after-tax account). The advantage of a Roth conversion is that all income and gains from the Roth investment can be taken as a tax-free distribution assuming the individual is over the age of 591/2 and the Roth account has been opened at least five years (qualified distribution). The downside of the Self-Directed Roth IRA conversion is that tax is due on the amount of cash or fair market value of the asset being converted. Accordingly, paying tax on depressed stock, which some have been down close to 20% could prove to be a tax advantages transaction, assuming you believe the market stock will increase in value in the future. The same type of strategy can be employed by taking the shares as a taxable distribution. Assuming one is over the age of 59 1/2, which would eliminate the 10% early distribution penalty, income tax would be due on the amount of the distribution, fair market value of the devalued shares. Again, if one believes the shares will increase in value in the future, then taking a taxable distribution now versus in the future when the shares may be worth more could make sense.

Some factors to consider when contemplating a Roth conversion or taxable distribution strategy with the depressed stock: (i) your ability to pay the tax now, (ii) availability of losses that can be used to offset any potential tax, (iii) your income tax bracket now versus your expected tax rate when you have to take RMDs, (iv) the size and value of your stock holdings, (v) and, of course, your long-term feelings about the stock.

“Since 2008, the stock markets have made many retirement account holders quite happy over years, but its recent slide and devalued prices of many popular stocks has created excited tax planning opportunities that come along with owning a devalued stock could prove to be a valuable exercise., such as the Roth IRA conversion” Stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control” Self Directed IRA and Solo 401(k) Plan provider. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please call 800-472-0646.

Share the knowledge
Posted in Self-Directed IRA