SOURCE: Equity Trust Company
NEW YORK, NY--(Marketwire - Oct 29, 2012) - An Individual Retirement Account (IRA) is a helpful investment vehicle for those seeking to save money and generate wealth for their retirement years -- but according to a recent article in The Wall Street Journal, getting the greatest value out of a traditional or a Roth IRA can sometimes be easier said than done. At the time it was written, the article had noted that investors had a few days left to "reverse Roth individual retirement account conversions made in 2011," something that may or may not have saved them money. The article had caught the attention of IRA custodial service Equity Trust Company. According to Equity Trust Company, complaints about the process of IRA "reversals" are common among investors. Equity Trust has weighed in on the issue with a new statement to the press.
"Complaints and confusion often surround the notion of 'reversing' a Roth IRA conversion," says the new statement from Equity Trust Company. The company goes on to explain what such a reversal entails. "The popularity of Roth IRA conversions has grown since 2010, when the income requirements that limited who could convert from a Traditional IRA to a Roth IRA were lifted. But just as the popularity in these conversions increased, so did the confusion around the little known strategy of re-converting back to a Traditional IRA from the Roth IRA."
According to Equity Trust Company, complaints like these typically stem from a simple lack of information about what is and is not allowed by the IRS. "The IRS generally gives you until the due date (including extensions received, which, in most cases, would get you to October 15th) for filing your federal tax return for the taxable year in which the conversion was made within which to try out the Roth IRA, and still allows you to go back to a Traditional IRA before the end of that trial period. Since converting to a Roth IRA from a Traditional IRA is a taxable event (the money converted is taxed as income in the year of conversion), people often want to reverse course if they realize that the value of their Roth IRA has diminished since the conversion so that their tax bill may be higher than contemplated in relation to the remaining value of their account."
Continues the Equity Trust Company statement, "For example, an account that is worth $10,000 on May 1 is converted to a Roth IRA, but because of market changes, the account is only worth $8,000 on September 15. That person will be liable for tax on the $10,000, and in this case, the person might want to reverse course back to his or her Traditional IRA. There would still be an opportunity to redo the conversion if the market again changes, but that person cannot reconvert in the same year as of the conversion and the waiting period between undoing the conversion and redoing it must be at least 30 days."
For Equity Trust Company, complaints about the ins and outs of retirement savings plans are best answered through increased information and education. The company is particularly zealous about empowering investors with information about self-directed IRA and 401(k) plans.
Equity Trust Company is the country's leading provider of self-directed IRAs and 401(k)s, with more than 130,000 clients in all 50 states and close to $11 billion dollars of retirement plan assets under administration. The company believes in self-directed retirement accounts as ideal vehicles for generating long-term wealth, as they allow investors the freedom to invest funds as they determine. At Equity Trust Company, complaints about restrictive traditional retirement programs are commonly heard, and the company responds to these complaints by providing information about the alternatives available through self-directed programs.