IMQ Application #3: Roth IRA Conversions

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  • Post last modified:September 1, 2023

 

Do you have any clients that want to take advantage of Roth IRA tax rules, but cannot because their income exceeds $200,000 or all their funds are tied up in the 401(k)?  We can help.  One can use the In Marriage QDRO® (IMQ) to gain access to all the funds in one spouse’s 401(k) that can then be liquidated or rolled over into a traditional IRA, then converted to a Roth IRA. This can be done if your client:

  • Is still employed and contributing to the 401(k).

 

  • Makes over $200,000 and is not eligible to contribute to a Roth IRA.

 

  • Always wanted to have a Roth IRA, but cannot afford the tax burden of a conversion. This is done by taking advantage of the 10% penalty being waived for those under 59 ½.

If any of your clients are on track to have higher income in a few years, OR if they have substantial income tax deductions now, OR if they are worried about future tax increases, you may need to consider taking the tax hit now and convert funds to a post-tax Roth account.

Imagine that 42-year old client converting a $400,000 401(k) to a $400,000 Roth IRA and watching the growth and appreciation growth tax free for the next 18 years. That is the unique power of the In Marriage QDRO®.

Check out the rest of our website to learn more about the IMQ and other applications that can be utilized for the benefit of your clients and your practice.