ÿþ<HTML> <HEAD> <TITLE>Roth IRA Conversion</TITLE> <META HTTP-EQUIV="Content-Type" CONTENT="text/html; charset=iso8859-1"> <META NAME="description" CONTENT="Financial Calculators, ©1998-2010 KJE Computer Solutions, LLC. For more information please see http://www.dinkytown.net"> <STYLE> <!-- BODY, TABLE, TD, TH, UL, OL, DD, DL, P, BR { font-family: helvetica, arial, sans-serif; font-size: 10pt; } H1 { font-family: helvetica, arial, sans-serif; font-size: 13pt; font-weight: bold; } DT { font-family: helvetica, arial, sans-serif; font-size: 10pt; font-weight: bold; } P.footer { font-family: helvetica, arial, sans-serif; font-size: 9pt; } DIV.large { font-family: helvetica, arial, sans-serif; font-size: 13pt; font-weight: bold; } --> </STYLE> </HEAD> <!-- Financial Calculators, ©1998-2008 KJE Computer Solutions, LLC. 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For more information please see: <A HREF="http://www.dinkytown.net">http://www.dinkytown.net</A> --> <H1>Roth IRA Conversion</H1><P>In 1997, the Roth IRA was introduced. This new IRA allowed for contributions to be made on an after tax basis and all gains (or growth) to be distributed completely tax-free. Since then, people with incomes under $100,000 have had the option to convert all or a portion of their existing Traditional IRAs to Roth IRAs. Beginning in 2008, participants with funds in eligible employer sponsored plans could also roll those funds directly over to a Roth IRA in a qualified rollover if their income did not exceed the $100,000 threshold. Starting in 2010, all IRA owners and participants in eligible employer sponsored plans, regardless of income level, will be eligible to convert their Traditional IRA and pre-tax funds in an employer-sponsored plan (401(a)/(k), 403(b) and governmental 457(b)) to a Roth IRA. Is this a good option for you? A conversion has both advantages and disadvantages that should be carefully considered before you make a decision. This calculator compares two alternatives with equal out of pocket costs to estimate the change in total net-worth, at retirement, if you convert your Traditional IRA into a Roth IRA.<BR><BR> <CENTER> <!--[if IE]><object name="calculator" classid="clsid:8AD9C840-044E-11D1-B3E9-00805F499D93" codebase="http://java.sun.com/update/1.6.0/jinstall-6-windows-i586.cab#Version=1,4,0,0" height="400" width="565"><param name="code" value="RothTransfer" /><param name="archive" value="dinkytown.jar" /> <P style="font-size:1px; color: #ffffff" line-height: 1px><![endif]--><![if !IE]><P style="font-size:1px; color: #ffffff" line-height: 1px><![endif]></P><![if !IE]><APPLET name="calculator" code="RothTransfer.class" align="baseline" WIDTH="565" height="400" archive="dinkytown.jar" ><![endif]> <PARAM name="MSG_POSITIVE" value="How much is this worth today? Based on your inputs, you would have to invest ROTH_TAX_TOT, which is the estimated tax due for this conversion, plus an additional ATR_NPV, to match the returns produced by the tax savings built into the Roth IRA."> <PARAM name="AGE" value="28"> <PARAM name="AGE_ATR" value="65"> <PARAM name="AMT" value="10000"> <PARAM name="Show_IRA_AF_TAX_ATR" value="true"> <PARAM name="ROR_INVEST" value="8"> <!--MSG_TAX_RATE--> <PARAM name="TAX_RATE" value="25"> <PARAM name="TAX_RATE_ATR" value="15"> <PARAM name="TAX_RATE_INVEST" value="15"> <PARAM name="YRS_AF_RTR" value="20"> <PARAM name="AMT_AF_TAX" value="0"> <!--CUSTOM PARAMETERS--> <PARAM name="TEXT_FOR_REPORT" value="<HTML> <HEAD> <TITLE>Roth IRA Conversion</TITLE> <META HTTP-EQUIV='Content-Type' CONTENT='text/html; charset=iso8859-1'> <META NAME='description' CONTENT='Financial Calculators, &QCPQ;1998-2010 KJE Computer Solutions, LLC. For more information please see http://www.dinkytown.net'> <STYLE> <!-- BODY, TABLE, TD, TH, UL, OL, DD, DL, P, BR { font-family: helvetica, arial, sans-serif; font-size: 10pt; } H1 { font-family: helvetica, arial, sans-serif; font-size: 13pt; font-weight: bold; } DT { font-family: helvetica, arial, sans-serif; font-size: 10pt; font-weight: bold; } P.footer { font-family: helvetica, arial, sans-serif; font-size: 9pt; } DIV.large { font-family: helvetica, arial, sans-serif; font-size: 13pt; font-weight: bold; } --> </STYLE> </HEAD> <BODY bgcolor='#FFFFFF' LINK='#003399' VLINK='#666666' BGCOLOR='#FFFFFF'> <P> <CENTER><table border=0 bgcolor='#000000' width=468 cellspacing=1 cellpadding=0><tr><td width='100%'><table bgcolor='#FFFFDD' border=0 width=468 cellspacing=1 cellpadding=5><tr><td width='100%' align=center valign=middle><DIV class=large>Roth IRA Conversion Results</DIV></td></tr></table></TD></TR></TABLE></CENTER> <H1>IRA could ATR_DIFF_MSG at retirement.</H1>**GRAPH**<P>Your retirement total savings, after taxes, would ATR_DIFF_MSG by converting your existing IRA to a Roth IRA. That equals a ATR_PERC_DIFF difference. ATR_EXTENDED_MSG <P>MSG_BREAKEVEN <H1>Compare Your Results</H1><CENTER> <table border=0 bgcolor='#000000' cellspacing=1 cellpadding=0 width='95%'><tr><td><table bgcolor='#FFFFFF' border=0 cellspacing=1 cellpadding=5 width='100%'> <TR BGCOLOR='CCCCCC'><TD><b>Traditional IRA at Retirement</b></TD> <TD><b>Roth IRA at Retirement</b></TD> </TR> <TR><TD> <BR> <TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 COLS=2 WIDTH='100%'> <TR><TD>IRA before taxes:</TD><TD>+ IRA_BF_TAX_ATR</TD></TR> <TR><TD>Tax liability at retirement:</TD><TD>- IRA_TAX_ATR</TD></TR> <TR><TD>Return on ROTH_TAX_TOT 'tax investment':</TD><TD>+ IRA_TAX_PMT_RTN_ATR</TD></TR> </TABLE> <P><B>Total portfolio value</B>= IRA_TOT_ATR </TD> <TD> <BR> <TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 COLS=2 WIDTH='100%'> <TR><TD>Roth IRA balance:</TD><TD>+ ROTH_TOT_ATR</TD></TR> <TR><TD>Tax liability at retirement:</TD><TD>- $0</TD></TR> <TR><TD>Return on 'tax investment'*:</TD><TD>+ $0</TD></TR> </TABLE> <BR><B>Total portfolio value</B>= ROTH_TOT_ATR </TD></TR> </TABLE></TD></TR></TABLE><BR> <B>Total difference at retirement: </B>ATR_$_DIFF<BR> <B>Percentage difference: </B>ATR_PERC_DIFF<BR> <P><TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 COLS=2 WIDTH='95%'><TR><TD> <P class=footer>*This calculator assumes that you invest the amount that you would have had to pay in taxes in a taxable investment account. The investment tax rate of TAX_RATE_INVEST is used to calculate the annual return on this taxable investment. </P> </CENTER></TD></TR> </TABLE> </CENTER> <H1>Your Input Values</H1><CENTER> <table border=0 bgcolor='#000000' cellspacing=1 cellpadding=0 width='95%'><tr><td width='100%'><table bgcolor='#FFFFFF' border=0 cellspacing=1 cellpadding=5 width='100%'> <TR BGCOLOR='CCCCCC'><TD COLSPAN=2><CENTER><B>Input Values</B></CENTER></TD></TR> <TR><TD>Amount to convert:&NBSP;</TD><TD>AMT</TD></TR> <TR><TD>Non-deductible contributions:</TD><TD>AMT_AF_TAX</TD></TR> <TR><TD>Current tax rate<sup>1</sup>:</TD><TD>TAX_RATE</TD></TR> <TR><TD>Tax rate at retirement<sup>2</sup>:</TD><TD>TAX_RATE_ATR</TD></TR> <TR><TD>Investment tax rate<sup>3</sup>:</TD><TD>TAX_RATE_INVEST</TD></TR> <TR><TD>Current age:&NBSP;</TD><TD>AGE</TD></TR> <TR><TD>Age at retirement&NBSP;</TD><TD>AGE_ATR</TD></TR> <TR><TD>Rate of return:</TD><TD>ROR_INVEST&NBSP;</TD></TR> <TR><TD>Roth tax liability<sup>4</sup>:</TD><TD>ROTH_TAX_TOT</TD></TR> <TR><TD>Taxes are due:</TD><TD>YEAR_TAX_DUE</TD></TR> </TABLE></TD></TR></TABLE> </CENTER> *Delaying your tax liability for a conversion is available for conversions that take place in 2010. This option divides your Roth Conversion tax liability into two payments, with no taxes are due for the conversion in 2010. In both 2011 and 2012, one half of your converted amount will be added to your income and subject to income tax. Please note that under current law, existing tax rates are set to expire at the end of 2010 and, absent further congressional action, will revert back to the higher rates in place in 2001 beginning in 2011. <P> <OL> <LI>Current marginal income tax rate that will apply to conversion amount. <LI>Expected marginal income tax rate at retirement. <LI>Expected marginal tax rate (based this on expected capital gains rate) for investment. <LI>Estimated tax amount due based on Roth IRA conversion amount. </OL> <BR> <HR SIZE=1> <CENTER><P class=footer> Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues. </P></CENTER><br><br> </BODY> </HTML> "> <H1><CENTER>This Financial Calculator requires SUN's Java"! Plug-in. If you see this message you will need to download SUN's Java"! Plug-in. This can be done automatically by clicking the yellow bar at the top of your browser and choosing  Install ActiveX Control . </CENTER></H1> <OL> You can also get SUN's Java"! Plug-in here: <A href="http://www.java.com/en/download/download_the_latest.jsp" target=_blank><b>Get the Java"! Plug-in!</b></A> <P>For more information about this Plug-in please visit: <A href="http://www.dinkytown.net/money/sunjvm.html" target=_blank><b>SUN's Java"! Plug-in</b></A> <BR>For more information these financial calculators please visit: <A href="http://www.dinkytown.net" target=_blank><b>Financial Calculators from KJE Computer Solutions, LLC</b></A> </OL><!--[if IE]></OBJECT><![endif]--><![if !IE]></APPLET><![endif]> </CENTER><CENTER><SCRIPT>document.write(showbuttons())</SCRIPT> </CENTER> <H1>Definitions</H1><P><TABLE align='center' WIDTH="95%"><TR><TD><DL><!--DEFN_START--> <DT><B>Please note the following important information regarding any Roth conversion</B><DD> <UL><LI>You must pay ordinary income tax on the amount converted (specifically, on pre-tax contributions and investment gains). <LI>If you pay the taxes using money from the traditional IRA, you will lose the potential benefits of tax-free growth on that amount. <LI>If you are under age 59½, you may be subject to a 10% federal tax penalty if you withdraw money from your traditional IRA to pay the tax on the conversion. You may also have to pay state tax penalties. <LI>If you convert in 2010, the amount converted will be automatically split and reported equally as income on tax returns for 2011 and 2012, unless you elect to report the entire conversion amount on the 2010 tax return. As top income-tax brackets are set to rise in 2011, if you expect to be in a higher tax bracket in 2011 and 2012, it may be better to report the whole conversion amount on your 2010 tax return. <LI>For an investor in a lower tax bracket, traditional IRA contributions may be tax-deductable while Roth IRA contributions are not. </UL><P> <DT><B>Amount to convert</B><DD>Amount to convert from a Traditional IRA account to a Roth IRA. We assume that you are paying any taxes owed with funds that you have available outside of the account you are converting. If you are under 59 1/2, the IRS treats any money not directly rolled over to the Roth IRA as an early withdrawal - even if that money is used to pay the tax bill caused by the conversion and, except in the case of a rollover from a governmental 457(b) plan, the funds will be subject to a federal tax penalty unless an exception applies. <P> <DT><B>Non-deductible contributions</B><DD>The amounts, if any, contributed to your traditional IRAs or employer sponsored accounts made with after-tax contributions. It is important to note that you may not "cherry pick" funds that are either after-tax or pre-tax to convert. If you are not converting all of your IRAs or the entire amount in your employer sponsored plan, you must convert a pro-rated amount of the pre-tax (deductible) and after-tax (nondeductible) balance. All of your IRAs are added together and treated as one for this purpose.<P> <DT><B>Current age</B><DD>Current age. This age must be less than 70. Since this calcualtor does not take Required Minimum Distributions (RMD) into account, which begin at age 70 1/2, it is not designed for individuals that are currently required to begin making these distributions.<P> <DT><B>Age at retirement</B><DD>Desired age at retirement.<P> <DT><B>Rate of return</B><DD>The annual rate of return for your IRA. This calculator assumes that your return is compounded annually. The actual rate of return is largely dependent on the type of investments you select. For example, from December 1999 to December 2009, the average annual compounded rate of return for the S&P 500 was -0.6%, including reinvestment of dividends. From January 1970 to December 2009, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.1% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.<P>It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge. <!--MSG_SALES_FEES--><P> <!--<DT><B>Total IRA Balance (for all IRAs)</B><DD>The current balance of all of your Traditional IRAs, SEP IRAs and rollover IRAs. If you are not converting all of your IRAs we use this balance to calculate the percentage of partial conversion that was made as non-deductible contributions.<P>--> <DT><B><!--MSG_TAX_RATE_DEFN-->Current tax rate</B><DD>Current marginal income tax rate that will apply to conversion amount. Please note that the marginal tax rate for your conversion may be higher than your current marginal tax rate if the conversion moves your AGI into a higher income tax bracket. It is also possible, especially on very large conversions, that part of your conversion be subject to more than one tax rate. Below are the resulting tax rates and income ranges for 2010:<P> <CENTER> <TABLE WIDTH=90% BORDER=1> <TR class=tblheader><TD align=center colspan=5><b>Filing Status and Income Tax Rates 2010</b><P class=footer>Caution: Do not use these tax rate schedules to figure 2009 taxes. Use only to figure 2010 estimates. </P></TD></TR> <TR class=tblheader><TD align=center width="12%"><b>Tax rate</b></TD><TD align=center width="22%"><b>Married filing jointly<BR>or Qualified Widow(er)</b></TD><TD align=center width="22%"><b>Single</b></TD><TD align=center width="22%"><b>Head of household</b></TD><TD align=center width="22%"><b>Married filing separately</b></TD></TR> <TR class=tblrow><TD align=center width="12%"><b>10%</b></TD> <TD align=center width="22%"> $0 - 16,750</TD> <TD align=center width="22%"> $0 - 8,375</TD> <TD align=center width="22%"> $0 - $11,950</TD> <TD align=center width="22%"> $0 - 8,375</TD></TR> <TR class=tblrow2><TD align=center width="12%"><b>15% </b></TD> <TD align=center width="22%"> $16,751- 68,000</TD> <TD align=center width="22%"> $8,376- 34,000</TD> <TD align=center width="22%"> $11,951- 45,550</TD> <TD align=center width="22%"> $8,376- 34,000</TD></TR> <TR class=tblrow><TD align=center width="12%"><b>25%</b></TD> <TD align=center width="22%"> $68,001- 137,300</TD> <TD align=center width="22%"> $34,001- 82,400</TD> <TD align=center width="22%"> $45,551- 117,650</TD> <TD align=center width="22%"> $34,001- 68,650</TD></TR> <TR class=tblrow2><TD align=center width="12%"><b>28%</b></TD> <TD align=center width="22%"> $137,301- 209,250</TD> <TD align=center width="22%"> $82,401- 171,850</TD> <TD align=center width="22%"> $117,651- 190,550</TD> <TD align=center width="22%"> $68,651- 104,625</TD></TR> <TR class=tblrow><TD align=center width="12%"><b>33%</b></TD> <TD align=center width="22%"> $209,251- 373,650</TD> <TD align=center width="22%"> $171,851- 373,650</TD> <TD align=center width="22%"> $190,551- 373,650</TD> <TD align=center width="22%"> $104,626- 186,825</TD></TR> <TR class=tblrow2><TD align=center width="12%"><b>35%</b></TD> <TD align=center width="22%"> over $373,650</TD> <TD align=center width="22%"> over $373,650</TD> <TD align=center width="22%"> over $373,650</TD> <TD align=center width="22%"> over $186,825</TD></TR> </TABLE></CENTER> <CENTER>Source: http://www.irs.gov/pub/irs-drop/rp-09-50.pdf</CENTER> <DT><B>Tax rate at retirement</B><DD>Expected marginal income tax rate at retirement.<P> <DT><B>Investment tax rate</B><DD>Expected marginal tax rate (base this on expected capital gains rate) for investments. This calculator assumes that you invest the amount that you would have had to pay in taxes in a taxable investment account. The investment tax rate is used for calculating the annual return on these taxable investments. For many, this will be the same as their income tax rate. If you expect your non-IRA investments to be primarily from long-term capital gains or divdends.<P> <DT><B>Use 2010 Option to delay tax payments</B><DD>Check this box to use the 2010 option to delay your Roth Conversion tax payments to 2011 and 2012. This option is only available for conversions that take place in 2010. When this box is checked, no taxes are due for the conversion in 2010. In both 2011 and 2012, one half of your converted amount will be added to your income and subject to income tax. Please note that under current law, existing tax rates are set to expire at the end of 2010 and, absent further congressional action, will revert back to the higher rates in place in 2001 beginning in 2011. <!--DEFN_END--></DL></TD></TR></TABLE> <BR> <HR SIZE=1> <CENTER> <P class=footer> Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues. </P></CENTER> <BR> </BODY> </HTML>