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Roth IRA could prove a smart investment

Floridians want to leave their heirs with as little trouble as possible after their death. To do so, there are a few ways to make this happen.

The tax cuts put into place during the administration of President George W. Bush are due to expire at the end of the year, and Congress has not acted to extend them. Republicans and Democrats thus far have not come to an agreement, which is a sign that taxpayers should not sit by idly.

One of the best ways to plan an estate is to put money into a Roth IRA account. In 2010, Congress did not renew the adjustable gross income limit of $100,000 for contributors to the Roth IRA. That meant that people of a high income could reap the benefits of a Roth IRA.

Some benefits of it are:

•· Roth contributions come from after-tax money. Once the contributor retires, the earnings and withdrawals are not taxed.

•· Roth IRAs provide a tax break that other accounts do not.

•· Roth income is not included in determining taxes on Social Security or on the effect extra income could have on Medicare premiums.

Because of the possibility of tax changes, people should convert traditional IRAs to Roth accounts by the end of the year, according to financial planning experts. After this year, exposure to taxes could be much worse.

Converting traditional IRA accounts, now, however, does not benefit people who intend to spend their money, but it could offer great tax savings to heirs later on.

As people age, a Roth IRA does not require minimum distributions. After converting to a Roth, people can leave their accounts as is, without any withdrawals, and leave the account to heirs.

Finances usually are complicated, but the lack of action in Washington makes that increasingly so this year. It is worth studying financial implications that could occur if the tax cuts are not extended and consulting experts, if necessary.

Source: ETF Daily News, "Leave Your Money to Your Heirs and Not Uncle Sam," Jason Jenkins, Oct. 3, 2012

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