Clients aren’t clear about new conversion rules, and need your help. More than half of investors who hold old 401(k)s with former employers aren’t clear whether those assets can be converted to Roth IRAs, according to findings from Fidelity Investments.
The survey of investors with retirement plan assets at former employers and annual household incomes of more than $100,000 showed that awareness of the Roth IRA conversion opportunity had increased over the past six months, but was still relatively low, with 35% of respondents aware of new tax rules that allowed investors at any income level to convert assets to a Roth IRA. That’s up from 12% from August 2009.
Investors’ knowledge of whether their 401(k) assets qualify for a Roth IRA conversion also has increased. Nearly half (45%) now say they know whether or not such assets can be converted to an IRA, up from 33% in 2009.
However, the Fidelity survey underscored a lack of understanding about Roth IRA conversion details that is keeping investors from rolling their workplace plan assets directly into Roth IRAs. When asked about the biggest barriers to converting, 33% said they do not understand the tax implications of converting to a Roth IRA and 22% are confused by the conversion process itself.