IRA conversions in 2010
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Roth IRA restrictions have loosened.
A new law that went into effect on January 1, 2010 eliminates restrictions that previously limited who could convert an IRA into a Roth IRA.
Now any person, married or single, no matter their MAGI (Modified Adjusted Gross Income), may convert their Traditional and SIMPLE IRAs (after the initial two-year holding period) to Roth IRAs.
So, if you were not eligible to contribute or convert to a Roth IRA before, 2010 might be a good time to consider converting the dollars you have been saving in a Traditional or SIMPLE IRA.
It is important to note, that if you elect to make a Roth conversion, you will pay income taxes on all the money you convert at your current income tax rate.
The new law does give you some flexibility for when you need to pay the income taxes for
any converted funds. You could opt to pay all of the taxes in 2010 (with your 2011 return) or you could split the taxes over two years, paying half in 2011 (on your 2012 return) and the remaining half in 2012 (on your 2013 return).
These options allow you to offset the taxed amount related to the conversion.
There is one other important tax-related item to consider before you decide whether or not to make a Roth conversion in 2010-current tax rates could expire and leave you paying higher income tax rates in 2011 since the marginal income tax brackets would revert to their higher 2001 levels.
Is a Roth IRA right for you?
It's important to note that although this option is now available to more people, it may not be the best option for you personally based on various factors. As with any important decision of this nature, you should consult with a trusted tax professional before deciding whether to convert or not.
To learn more about Traditional and Roth IRAs, visit Sb1's Retirement Central site.
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| Why pay more? |
Transfer those high charging credit card payments to a new Sb1 Visa Credit Card. With Sb1, we don't have any hidden rates. What you see is what you get. Start saving yourself money each month.
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