Roth Conversion Funds

A Roth Conversion Strategy

That May Reduce Taxes Over the Long Term

A Roth IRA Conversion is a technique used by high-income earners—who exceed Roth IRA income limits—to convert traditional IRA assets to a Roth IRA.

Using this strategy with investments in real estate under development may lower the amount of tax due at conversion, while also providing tax-free distributions and no required minimum distributions.

An Efficient Strategy

Here is why this strategy can be especially effective with investments in real estate under development:

This is neither an offer to sell nor a solicitation of an offer to buy any securities. An offering is made only by the applicable offering documents and should be read fully in order to understand fully all of the objectives, risks, charges and expenses associated with an investment. Securities offered through ARKap Markets Member: FINRA/SIPC. ARKap Markets and Trilogy Real Estate Group LLC are not affiliated companies.

Client Case Study

Investor Situation & Challenges:

Our client was a C-Suite level executive of a Fortune 500 company and had a majority of her compensation and retirement savings in the company’s 401k plan. Approaching 60, she was seriously considering retiring in the next 5 years and wanted to see what kind of income she could realistically receive once she decided to stop working. We advised her that it would be advantageous to convert some of these assets to a Roth IRA for several reasons.

Results/Outcomes:

We devised a plan to begin converting funds from her 401k plan into an individual Roth IRA systematically over the next 10 years utilizing various Roth Conversion funds. Our goal is to convert 30% of her 401k before she turns 70.

Buy utilizing this plan, she will only end up paying taxes on approximately 60% of what we end up converting, and placing a significant portion of her retirement savings into a tax-free account (on the growth and income).

Additionally, she has lowered her future RMD requirements and now has more control over them once the IRS forces withdrawals from her 401k. Not only are the amounts going to be lower, but now income producing assets are solving most of those requirements, allowing her to the flexibility to not sell stock in a down market. The stable income from the funds we selected also give her the freedom to continue to invest somewhat aggressively even in her retirement years in order to battle inflation and grow her net worth.

* The scenarios provided herein are meant only to demonstrate principals. There can be no guarantee of performance or that any investment will achieve its stated objectives.

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General Disclosure:

All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future performance. There can be no guarantee that any investment or strategy will achieve its stated objectives. Speak to your tax and/or financial professional prior to investing. Securities and advisory services through Emerson Equity LLC, member FINRA and SIPC and a registered investment adviser. Emerson is not affiliated with any other entity identified herein.

Real Estate / 1031 Risk Disclosure:

There is no guarantee that any strategy will be successful or achieve investment objectives; Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments; Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities; Potential for foreclosure – All fnanced real estate investments have potential for foreclosure; Illiquidity –These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash ﬂow distributions; Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefts. Stated tax benefts – Any stated tax benefts are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.

Opportunity Zones Disclosures:

Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings. Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments. Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations. Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available. Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund. Leverage. Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments. Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities. Regulation. It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.