• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Parman & Easterday

Oklahoma Estate Planning Attorneys

Call Now: (405) 843-6100 |
(918) 615-2700

Attend an Education Program-Oklahoma City Area Attend An Education Program in the Tulsa Area
  • Home
  • Our Firm
    • About Our Firm
    • Attorney and Staff Profiles
    • What Our Clients Say
  • Estate Planning
    • Asset Protection
    • Business Succession Planning
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • IRA and Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • Powers of Attorney
    • Probate
    • SECURE Act
    • Special Needs Planning
    • Trust Administration and Probate
    • Young Families
  • Elder Law
    • Coping With Alzheimer’s
    • Elder Law
    • Emergency Medicaid
    • Guardianship & Conservatorship
    • Hospice Care
    • Medicaid Planning
    • Veteran’s Benefits
  • Resources
    • Asset Protection Worksheet
    • DocuBank
    • Elder Law
      • Elder Law & Medicaid Definitions
      • Elder Law Reports
      • Elder Law Resources
        • Edmond Elder Law
        • Oklahoma City Elder Law
        • Overland Park Elder Law
        • Yukon Elder Law
      • Medicaid
      • Nursing Home Resources
    • Estate Planning
      • An Overview of Estate and Gift Taxes
      • Estate Planning Checkup
      • Estate Planning Definitions
      • Estate Planning Reports
        • Advanced Estate Planning
        • Basic Estate Planning
        • Estate Planning for Niches
        • Trust Administration
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate and Legacy Planning Techniques
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Alzheimer’s FAQs
      • Asset Protection Planning
      • Estate Planning
      • Elder Law
      • Frequently Asked Questions for Families Without an Estate Plan
      • Inheritance Planning for Minors
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid Planning
      • Nursing Home Asset Protection
      • Probate
      • Trust Administration
      • Trust Administration & Probate
      • Wills and Trusts
    • Newsletters
    • Probate and Trust Administration
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss of a Loved One
      • Probate Checklist
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
    • Probate Resources
      • Midwest City Probate
      • Moore Probate
      • Oklahoma City Probate
      • Overland Park Probate
    • Published Books
    • Pre Consultation Form
  • Communities We Serve
    • Edmond
    • Midwest City
    • Moore
    • Norman
    • Oklahoma City
    • Yukon
  • Reviews
    • Our Reviews
    • Review Us
  • BLOG
  • Contact Us
Home » Asset Protection » Roth IRAs Can Be a Great Planning Strategy: Basics

Roth IRAs Can Be a Great Planning Strategy: Basics

August 18, 2021 by Courtesy of Parman and Easterday

Roth IRAs can be a great planning strategy. They can save taxes and help in many ways.

This is the first in a two-part series on Roth IRAs. This first part will look at the basics of Roth IRAs. The second part will look at more advanced planning strategies.

An Individual Retirement Account (IRA) is a savings vehicle in which a deduction may be taken upon contribution (with limitations). The maximum contribution in 2021 is $6,000, and those age 50 and over may contribute an additional $1,000. While the assets are in the IRA, the income is not taxable. However, when distributions are taken in retirement, those distributions are included in taxable income.

A Roth IRA is almost the reverse of a traditional IRA. A taxpayer contributing to a Roth IRA does not get a deduction for the contribution. The earnings grow tax-free. And when the distributions come out, they are generally not taxable.

A taxpayer only qualifies to contribute to a Roth IRA if their taxable income is within certain limits. Married taxpayers filing a joint return may contribute the full amount if their income is below $198,000 in 2021. There is a phaseout and then the taxpayer cannot contribute anything if their income is $208,000 or higher. For an unmarried taxpayer, they may make a full Roth IRA contribution if their income is below $125,000 in 2021. There is a phaseout up to $140,000 and then no contribution is allowed.

While eligibility to contribute to a Roth IRA depends upon the taxpayer’s taxable income, anyone may convert their IRA to a Roth IRA. When they do a conversion, the amount of the traditional IRA is income taxable.

Let’s look at a quick example: John normally has income of $300,000 per year. He was furloughed until 2022 due to the pandemic. He has no income in 2021. He has a traditional IRA of $50,000. He could convert his traditional IRA to a Roth IRA and would pay tax at relatively low rates since his income is lower in 2021.

If a taxpayer doesn’t qualify to contribute to a Roth IRA, they may be able to contribute to a traditional IRA (deductible or nondeductible) and then convert that IRA to a Roth IRA.

One of the key factors in converting (or contributing) to a Roth IRA is whether the tax rate at the time of conversion (or contribution) will be lower than the expected tax rate at the time of distribution.

The next article in the series will examine other planning strategies with Roth IRAs.

Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128

  • Author
  • Recent Posts
Courtesy of Parman and Easterday
Latest posts by Courtesy of Parman and Easterday (see all)
  • Tis the Season for Giving - February 1, 2023
  • Tax Planning for 2023 - January 25, 2023
  • Now That Mid-Terms Are Over, Let’s Talk Taxes - January 18, 2023

Filed Under: Estate Planning, Legal Education Tagged With: attorney, consumer, Estate Planning, IRAs, planning, Roth

Other Articles You May Find Useful

wills and trusts
4 Things Trusts Do That Wills Can’t Do
advance estate planning property liquidation
Downsizing Can Be Part of Your Estate Plan
Now That Mid-Terms Are Over, Let’s Talk Taxes
ancillary probate
Prevent the Nightmare of Ancillary Probate
Common Mistakes in Estate Planning – Part V
estate contest no-contest clause
Take These Steps to Prevent an Estate Contest

Primary Sidebar

Parman & Easterday, LLP

DOWNLOAD OUR FREE ESTATE PLANNING CHECKLIST

SUBSCRIBE TO OUR BLOG

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Where We Are

OKLAHOMA CITY, OK
13913 Quail Pointe Drive, Suite B
Oklahoma City, OK 73134
Phone: (405) 843-6100
Fax: (405) 917-7018

MAP

parman_sidbr_map

Where We Are

TULSA, OK
Memorial Place 7633 E. 63rd Place
Tulsa, OK 74133
Phone: (918) 615-2700

MAP

parman_sidbr_map

Office Hours

Monday9:00 AM - 5:30 PM
Tuesday9:00 AM - 5:30 PM
Wednesday9:00 AM - 5:30 PM
Thursday9:00 AM - 5:30 PM
Friday9:00 AM - 12:00 PM

Footer

footer-logo

The information on this Oklahoma Law Firm website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Oklahoma City Estate Planning Attorneys at Parman & Easterday offer estate planning services in the Oklahoma City, Oklahoma and surrounding areas. Contact us for help today.

Privacy Policy | Contact Us | Disclaimer | Site Map | Powered by American Academy of Estate Planning Attorneys


© 2023 American Academy of Estate Planning Attorneys, Inc.
  • Facebook
  • LinkedIn
  • Twitter
  • YouTube