Roth IRA Conversion Called “No-Brainer” by Economist Arthur Laffer

June 7, 2010 - PRLog -- Raleigh, N. C. In his Wall Street Journal guest editorial today, economist Athur Laffer called the initial decision to convert to a Roth IRA a “no-brainer.” (Tax Hikes and the 2011 Economic Collapse, WSJ, June 7, 2010).

“In 2010,” wrote Laffer, “without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future.”

“Given what's going to happen to tax rates,” he added, “this conversion seems like a no-brainer.”

The same language and term “no-brainer” was used by the RTP Roth Advisory Network in their May 3, 2010 announcement to describe how easy it is to make the initial decision to convert retirement plan assets this year to a Roth IRA. They stated that, “For the great majority of citizens with retirement plan assets over $100,000, the initial decision to convert is a “no-brainer.”

“We suspect that income tax and estate taxes are going up,” said Thomas E. Vass, in the May 3, 2010 announcement of the new Roth Professional advisory network. “We also suspect that the income distributions from the tax free Roth IRA will become subject to more government interest in the future, which will require that advisors try to hit political moving targets as the tax rules change,” he added.

The point about tax rates going up was also made by Laffer, who pioneered the concept that lower marginal tax rates lead to higher tax collections, a policy implemented successfully during President Reagan’s administration.
Laffer stated in his editorial that, “On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero.”
“The longer people wait to make the initial decision,” said Vass, “the closer they get to blowing the small window of opportunity to lower their tax rates in the future.” He added that the initial decision to convert to a Roth IRA is followed by years of complex tax and legal issues that will require on-going professional advice.
“We are trying to maximize the financial benefits to clients over a long period of time,” said Austin Chestnut, a member of the RTP advisory network and a business and estate attorney. “The initial decision will require integrating changes to the estate plan and trust creation with investment management of the Roth IRA assets.”
About the RTP Roth IRA Professional Network: Our professional advisory services begin with you gaining  self-education about the Roth IRA by filling in our self-guided client intake form. We use this form to help us coordinate our advice to you. We invite you to visit our respective websites to see if we look like the kind of professional advisory team that can help you with the Roth IRA process.

Lois J. Hamilton, PLLC. Certified Public Accountant 7501 Creedmoor Road, Suite 110. Raleigh, N.C. 27613 919-882-7800 lois@hamiltonpllc.com http://hamiltonpllc.com/
Austin Chestnut, J.D., MBA Shanahan Law Group, PLLC achestnut@shanahanlawgroup.com 919.856.9494 or http://shanahanlawgroup.com/Bio/AustinChestnut.asp
Thomas E. Vass, Investment Advisor. Investment Management & Insurance Advisors, Inc. tvass@technologystockadvisor.com. 919 975 4856 http://www.technologystockadvisor.com

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