Roth IRA Conversions Are Interest-Free for Wealthy Due to New Tax Bill

Roth IRA conversions will be interest-free until the end of the year for those in the highest tax bracket.
Roth IRA Conversions Are Interest-Free for Wealthy Due to New Tax Bill
12/24/2010
Updated:
12/24/2010
Roth IRA conversions will be interest-free until the end of the year for those in the highest tax bracket, according to a recent Bloomberg News report.

Traditional IRA retirement accounts can be converted to Roth IRAs, with an advantage of paying taxes upon deposit and not on withdrawals. Wealthy Americans can get the equivalent of an interest-free tax break if they make a conversion before the New Year due to an extension of Bush-era tax cuts.

“It’s the deal of the century,” Ed Slott of irahelp.com told Bloomberg News. “It’s like Congress is giving you an interest-free loan to build a tax-free savings account.”

Earlier this month, Congress and President Barack Obama passed into law a tax-cut bill that cost nearly $900 billion that extended Bush-era tax rates.

The tax reprieve will affect IRA holders and a transfer from a traditional IRA to a Roth IRA could save rich Americans thousands of dollars.

For example, someone with an IRA account with $1.2 million would save more than $55,000 in taxes due to the new tax law, according to Bloomberg.