Many of you probably have a Traditional IRA that you make contributions to without taking tax deductions. You will not pay taxes on these contributions when they are withdrawn. Earnings however are a different story. Each time you withdraw money from the IRA in the future, a portion will be taxable and a portion tax-free. The best part…You are responsible for tracking the difference.
How it works
For example: Over the years you have contributed a total of $20,000 without taking the tax deduction. Now, with earnings, the account balance is $40,000. Assuming no additional earnings, each time you take a withdrawal, 50% will be tax-free and 50% will be taxable.
**It usually gets more complicated because they’re never round numbers.**
The Good News & How We Can Help
If your company retirement plan accepts IRA rollovers, The Trust Company has a strategy to eliminate headache of tracking future taxable vs. tax-free distributions. An added benefit is the possibility of establishing a Roth IRA for future tax-free growth.
Tax-law allows pre-tax money to be rolled to a company retirement plan without taxes being due. If you convert the remaining balance to a Roth IRA, it will be done without taxes owed on any of the money. The only rules to remain tax-free are that funds must remain in the Roth for at least 5 years& withdrawals must be made after you are age 59 ½.
If this sounds appealing to you, contact us and we’ll help you determine the best strategy for your situation. We’d like be a part of your success story.