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What's So Great About the Roth IRA? | Selling Life & Annuities - YouTube
Channel: Gordon Marketing
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hey everybody it's randy pearson vice
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president of life and annuities for
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gordon marketing and welcome to another
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edition of selling life and annuities
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where today i've got with me tim luby
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our rvp for annuities
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and we're going to be talking about roth
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iras traditional iras and you know
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what's so good or not so good about both
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stay tuned
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[Music]
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all right tim so
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roth traditional ira i'm always amazed
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by
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you know consumers
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the everyday man on the street that i
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speak to that really doesn't understand
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you know what a roth ira is a
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traditional ira the advantages or
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disadvantages of each so can you help
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the folks that are watching this video
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that aren't quite so sure
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understand the difference yeah so
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certainly yeah
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so a traditional ira
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essentially just means money that's been
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saved for retirement that hasn't been
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taxed yet primarily you know people put
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money in an ira and none of that money's
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been taxed
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and the biggest advantage to roth is
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that the roth money gets taxed on the
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way in but then it's tax free when it
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comes out that's the real crux in some
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terms of what's so great about the roth
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ira it's the taxes all right very good
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you know i assume that a consumer needs
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to make a determination they've got
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money that they want to put away for
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retirement they're going to make a
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determination at the beginning of the
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process whether it it's going to go
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traditional or roth right right and it's
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much more convenient and common to put
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money into an ira or to you know to save
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money through a 401k that then is very
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easily converted to an ira or 403b or
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many of the retirement of the
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employer-sponsored you know retirement
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plans that are out there are very easily
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converted to iras okay they're not
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easily converted to roth iras
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because you have to pay tax on it
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sure and if you're under 59 and a half
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you may have to pay a 10 penalty tax too
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so
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the opportunity to convert from other
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qualified funds into the roth is
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outstanding but it it comes with some
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challenges you know right you've got to
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be able to handle the taxes okay so i it
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seems to me over time i've heard about
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certain periods where consumers could
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get a sort of a special dispensation for
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converting from a traditional ira to a
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roth do those exist today
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yes yeah that's one of the biggest ways
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to get into the roth is by conversion
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you know because the annual contribution
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limits are very similar to what they are
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for an ira six to seven thousand dollars
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for an individual depending on their age
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which isn't going to get you too far if
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you've got a big retirement plan you
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know going at those rates so conversion
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is a big opportunity
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and we've got a number of opportunities
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where you can do a partial so say
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someone has a half a million dollars in
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a qualified plan and they want to
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convert some of that into roth so that
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in retirement they have a big piece that
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is not subject to tax okay they could do
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that let's say they wanted to convert
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two hundred thousand maybe they would do
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forty thousand dollars a year every year
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for five years
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and move that from ira status into roth
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ira status i would get a tax bill for
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that 40 grand every year for five years
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but that might be manageable right given
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what their goals are all right when
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we're looking at doing conversions is
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there a is there an advantage or a
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disadvantage with regard to when we
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exercise those the timing of those
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conversions
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it's it's really when you can afford to
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you know it doesn't work for everybody
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so maybe when your tax rate is lower
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when your tax rate is lower yes you know
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or you know and you would maybe decide
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to convert the amount that won't throw
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your taxes into like a higher bracket
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and you know so there's some some
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thinking into going on you know figuring
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out how you do it even if your tax break
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isn't so much lower uh we're actually at
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a historically low tax level so you know
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the question is do you think taxes are
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going to be lower when you retire or
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perhaps they're going to be higher
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absolutely and so it makes sense and a
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lot of people are of the mind to take
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the hit today you know they'd rather pay
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the tax today and just know that they're
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going to have a tax-free portion of the
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retirement income later so what are the
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steps what is it what would a consumer
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have to do to to
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to take advantage of the the roth right
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well you know get some help to determine
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that it's appropriate for them you know
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that it's not going to
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be
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throw them into an egregious tax
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situation where you know it just really
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doesn't make sense sure but then if they
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do that you know how much do they want
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to do and let's find the right vehicle
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to do it there are solutions out there
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where you could buy an annuity and um
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convert part of it even in the same
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annuity you know every year for five
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years or ten years you know so start
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with let's say a hundred thousand
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dollars in an ira and over the course of
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five or ten years have the same hundred
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thousand dollars to whatever it's grown
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to
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in the same contract but now completely
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this roth ira now if that's the case
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you've paid tax on that 100 grand you
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know a little bit every year during that
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whole contract okay and you can start
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with within the same contract you know
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all ira money and move it all to roth
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you're going to have to fill out a form
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every year you have to request and raise
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your hand and say i want to do this
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every year and you're going to get a
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10.99 for that amount that you're
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converting every year
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but at the end
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you're in the roth
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you know of the industry so there are
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there any other uh benefits advantages
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to the consumer things that are not
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commonly known and or discussed that the
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folks watching this video ought to know
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about i think the biggest one is um that
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ross
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first of all that you don't pay tax on
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them when you come out secondly that you
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never have required distributions like
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with iras when you reach 72 now you are
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required to take money out every year so
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the fact that with the roth you're not
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required to take money out
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and when you do take it out you don't
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pay taxes
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that's like a double whammy i mean it
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really makes it a an outstanding um
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component of anybody's retirement plan
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yeah excellent i assume that if an
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advisor is watching this video if an
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agent is interested in getting more
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information on how to take advantage of
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some of the things we've discussed today
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that you might have some material you
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can send their way absolutely uh we've
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got some white papers and even uh some
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of the carriers that we work with that
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that you know sponsor this or support
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this plan uh so we can help you with uh
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information that you can share with your
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clients on it white papers to help you
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get up to speed on it the forms that you
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need to do the conversion every year you
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know the irs tax forms so yeah we've got
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all the resources that you would need to
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help you affect the roth conversion with
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you know whatever solution you choose to
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go with excellent very good well so if
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you're an advisor if you're an agent out
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there and you'd like to expand your
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knowledge and certainly become more
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proficient in assisting your clients and
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taking advantage of some of these tax
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issues in retirement i would suggest you
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reach out to tim here at gordon
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marketing he's always available or any
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other member of our marketing team but
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for now unfortunately we've run out of
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time so i want to express my
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appreciation for watching our video
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please do me a favor click subscribe and
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the notification bell right below so
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that every time we come out with new
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content you'll be sure to know about it
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but for now happy selling
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[Music]
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you
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