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Last years' Taxpayer Relief Act of 1997, which raised the Unified Credit, also created the new Roth IRA. The Roth IRA is unique because, if it is open for at least five years and you meet certain conditions, your Roth earnings and withdrawals are never taxed. Since its introduction in January, many brokerages (including SaveWealth) have been flooded with calls and requests to convert existing IRAs to Roth IRAs. If your Adjusted Gross Income is $100,000 or less, you can convert to a Roth IRA, but you must pay income tax on any earnings or tax-deferred contributions you made to your old IRA. So what's the hurry? With the stock market sagging, converting your IRA now may incur a lower tax bill. That's because your old IRA may have a significantly reduced value, even from a couple of months ago when the market hit record levels. Plus, if you convert before December 31, 1998, you'll have the option of spreading your tax bill out over four years. Under new Roth rules signed into law in July, you can undo a conversion as late as the day you submit your tax return. So, if you've already made the switch, but your investment has sunk below the conversion value, you may be able to switch back to a traditional IRA, then flip again to a Roth IRA at the reduced value. This scenario could reduce your conversion's tax bill. One word of caution: such flip-flops must be handled by a trustee-to-trustee transfer, not by a rollover (where you actually receive the money and send it right back to your IRA company). Ask your broker how to effect such a transfer, or contact one of SaveWealth's Roth IRA Specialists for more information.
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The Taxpayer Relief
Traditional and Roth IRAs are available by prospectus only. Please read the prospectus carefully before investing or sending money. Securities offered through American General Securities, Inc., member NASD.
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