Fidelity Investments is a well known Boston mutual fund company. They are hugely involved in offering workplace retirement saving plans and Individual Retirement Accounts (IRAs). In the December Roth IRA conversions report, so many investors took advantage of the Roth IRAs tax benefits it lead Fidelity to report a big spike in conversions.
Fidelity has stated that the Roth IRA conversions in 2010 resulted in a 400% increase among its customers compared to 2009. This is caused by the new rules that have just been made effective recently. These rules made it possible for more people to qualify for Roth IRAs. Fidelity also said that almost 30% of Fidelity’s Roth IRA conversions during 2010 took place in the month of December.
If you compare a Traditional IRA vs Roth IRA, you will see that traditional IRA makes people contribute to a particular account involving money that may be allowed to be deducted on their tax returns, and as long as any earnings are not withdrawn, it potentially grows without being taxed.
For Roth IRAs on the other hand, people are made to contribute on an account involving money they already have paid taxes on. This means that the money from this account grows with no taxes. Given that particular conditions are met, retirement withdrawals have no taxes taken out either.
Fidelity Investments’ senior vice president of investor education, retirement, and financial planning, Chris McDermott said that whether investors convert to Roth IRA or not is just the first step in finding out potential ways to maximize their assets by minimizing retirement taxes, and they expect that the conversion will continue through 2011.
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