Your client, Charley Long, age $40,$ has requested your advice with respect $to$ his IRA. $He$ has a traditional IRA with a balance $of$ $$250,000$ and his current AGI $is$ $$150,000.He$ expects his income $to$ increase slightly when $he$ retires $at$ age $65.$ Charley has been reading about Roth IRAs and wants your advice $asto$ whether $he$ should rollover the $$250,000$ from his traditional IRA into a Roth IRA. $He$ has sufficient outside money $to$ pay any taxes due $on$ the rollover. What advice would you give Charley?

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Part $1$

$A.$

$If$ Charley rolls his traditional IRA into a Roth IRA, $he$ must include the rollover $in$ his gross income and pay income taxes $on$ such amount, and when Charley withdraws amounts from his Roth IRA $at$ retirement, more taxes will $be$ due. Thus, $he$ should not $be$ advised $to$ rollover his traditional IRA into a Roth IRA.

$B.$

$If$ Charley rolls his traditional IRA into a Roth IRA, $he$ must include the rollover $in$ his gross income and pay income taxes $on$ such amount. Since his tax rate $is$ much higher now than $it$ will $beat$ retirement, $he$ should not $be$ advised $to$ rollover his traditional IRA into a Roth IRA.

$C.$

$If$ Charley rolls his traditional IRA into a Roth IRA, $he$ must include the rollover $in$ his gross income and pay income taxes $on$ such amount, but when Charley withdraws amounts from his Roth IRA $at$ retirement, $no$ further taxes will $be$ due. Since Charley's marginal tax rate $at$ retirement will $beno$ higher than his present rate and $he$ has funds outside $of$ his IRA $to$ pay the tax, $he$ should $be$ advised $to$ rollover his traditional IRA into a Roth IRA and pay the tax now. The principal economic benefit $is$ that the rollover funds $in$ the Roth IRA are able $to$ grow tax$-$free and $be$ ultimately withdrawn tax$-$free.

$D.$

Since there are $no$ tax implications when rolling a traditional IRA into a Roth IRA, Charley should $be$ advised $to$ rollover his traditional IRA into a Roth IRA. The principal economic benefit $is$ that the rollover funds $in$ the Roth IRA are able $to$ grow tax$-$free and $be$ ultimately withdrawn tax$-$free.