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Like other tax laws, the so-called Taxpayer Relief Act of 1997 and its new Roth Individual Retirement Account has investors asking questions."There's a huge interest and a lot of confusion about it," says Ellen Breslow, director of individual retirement planning services at Smith Barney in New York. "You can't imagine."Not everyone is eligible to contribute to a Roth IRA, available this year for the

Like other tax laws, the so-called Taxpayer Relief Act of 1997 and its new Roth Individual Retirement Account has investors asking questions.

"There's a huge interest and a lot of confusion about it," says Ellen Breslow, director of individual retirement planning services at Smith Barney in New York. "You can't imagine."

Not everyone is eligible to contribute to a Roth IRA, available this year for the first time, and there's no set formula for when someone should transfer money from a traditional IRA to a Roth account.

"The simple answer is it's not simple," says Steve Cooper, a financial planner at Bernard R. Wolfe & Associates in Chevy Chase, Md. "There are a lot of questions that have to be asked and answered, and it's different for every individual."

While almost anyone can contribute to a traditional IRA, not everyone qualifies to open a Roth account. Individuals with incomes below $95,000 can contribute up to $2,000 a year, but that amount declines as earnings rise to $110,000 at which point contributions aren't allowed. Couples earning less than $150,000 can contribute up to $4,000 ($2,000 each). That amount declines as income rises, and at $160,000 they're out of the Roth game.

Meanwhile, to roll money from an existing IRA into a Roth account, an individual or couple cannot make more than $100,000 a year.

However, there are some occasions when just about everyone agrees a Roth account is better. For example, for people who make non-deductible IRA contributions each year, the Roth account is a "no-brainer." That's because, under most circumstances and unlike traditional IRAs, withdrawals from a Roth plan aren't taxed.

Even for people who can deduct all or part of their IRA contributions, a Roth plan will give them more money in the long run. Investors can take tax-free distributions from a Roth IRA at 591/2 as long as the money has been in the account at least five years. The higher a person's income tax rate when they retire, the greater the benefit.

"I think you can make a pretty strong case for putting current and future contributions into a Roth IRA," says Cynthia Bohlen, assistant vice president at the Marshall Funds in Milwaukee. "They're very similar to existing IRAs, but they have a lot more flexibility down the road."

Along with no taxes, money contributed to a Roth IRA can be taken out without a penalty at any time, although penalties and taxes apply to earnings taken out before age 591/2 or before five years. There also are other loopholes for certain uses, such as buying a home. Also, investors aren't forced to take withdrawals at 701/2 as is the case with traditional IRAs. Roth assets will go to heirs income-tax-free as well.

Roll It? The real quandary is whether to exchange money from an existing tax-deferred IRA into a Roth account. An investor's age, expected timing for distributions, current income, tax bracket and marital status all need to be considered. That's because the rollover is a taxable event, and could boost someone's income tax bracket as well as create a big enough tax bill to make the rollover uneconomic. Remember, too, that the four-year tax averaging gimmick this year can be replicated at any time simply by rolling over one-quarter of a traditional IRA in subsequent years.

Also be aware that changes are coming regarding rollover rules. One issue likely to be addressed by a technical fix-it tax bill this year is how to treat "basis" money from a traditional IRA rolled into a Roth IRA. The existing law doesn't make it clear that money rolled from a traditional IRA cannot be immediately withdrawn from a Roth account without a penalty.

Regardless of pending uncertainties, young investors and other people with moderate amounts in their IRAs will almost always benefit from a rollover, says Gary Battenberg, a managing executive with Royal Alliance in Kingwood, Texas. "It was designed for the $30,000 to $50,000 accounts," he says.

If investors make an exchange this year, they can spread tax payments equally through 2001. However, investors should not roll money into a Roth account if they can't afford to pay the tax. And using IRA money to pay the tax could incur a 10% penalty in addition to the income taxes due.

Andrew Atkinson, a lecturer in the department of accounting and finance at the University of Nebraska in Kearney, says people in the 28% tax bracket should not roll money into a Roth IRA unless they face income tax rates of at least 36% or more upon retirement. The exception might be for people who live in a state, such as Florida, with no income tax who plan to retire to a state with an income tax of about 7% or more.

For many people, the toughest decision involving a Roth versus traditional IRA will come when they have to roll a large 401(k) balance, especially if the rollover occurs after 1998. The large lump sum could trigger a huge tax bill.

"There's no trick on this one," says Cooper. "You have to roll up your sleeves and turn on your calculator."

The new Roth IRA plan has created a flurry of interest in IRAs. But brokers and advisers must make sure not to jump in blindly before deciding whether a Roth IRA makes sense for a client.

"It has to be part of a general financial and retirement plan," says Bill Starkey, retirement plans director at Prudential Securities in New York.

Given Congress' propensity to fiddle with the tax code, some advisers say it makes sense for investors to have a traditional and a Roth IRA. That way, those retiring in a lower tax bracket get the benefit of a tax-deduction now and lower tax rates when they retire. If someone is in a higher bracket when they retire, the Roth pays off because none of the money coming out is taxed. With both types of IRAs, clients can take money from either IRA bucket depending on their tax situation. It's sort of a way to "hedge" future tax rates, Starkey says.

Although 1998 is the only year in which income tax payments on Roth rollovers can be spread over a four-year period, there's a chance Congress will extend that window of opportunity--just as they did with the '97 tax act when they repealed (at least for now) the so-called 15% "success tax" on large retirement accounts.

Some wealthy and middle-income investors simply won't be able to roll money into a Roth IRA. That's because singles or couples earning more than $100,000 can't roll. Even if they could, they'd probably pay more than 30% in taxes in most states on the money they transfer. People who might exceed $100,000 in income probably shouldn't risk a Roth.

Other factors to consider include the deductibility of health care and other expenses when a person gets older, says Andrew Atkinson, a lecturer in the department of accounting and finance at the University of Nebraska in Kearney.

Because withdrawals from a Roth IRA will not count as income (distributions from regular IRAs do count), retirees may be better able to deduct medical expenses that exceed 7.5% of their annual gross income and other expenses, such as job-related costs, which can be itemized only if they exceed 2% of AGI. A Roth IRA also could affect child support payments, college aid and other income-based financial-aid programs, Atkinson says.

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