Should You Consider A 2010 Roth Ira Conversion?

Should You Consider A 2010 Roth Ira Conversion?

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The income restriction for conversions is being lifted at least for the year 2010. This makes you eligible to convert to a Roth IRA regardless of your income level. Roth IRA conversions did require you to pay income tax on the full amount of any tax-deferred assets in the year of the conversion, however, with the change to the new rule for 2010 you can pay the tax in full in 2010 or spread the tax liability equally in the years 2011 and 2012.

No matter what type of IRA or other investment accounts you have, the key is making sure they are producing the best return you can get so as to grow those accounts to levels to help you meet all your retirement dreams. You can find out more about my program for doing just that at the bottom of this article.

The primary advantage of the Roth IRA is your investments grow tax free and you don't have to pay income tax on your withdrawals when you retire, provided that the withdrawals are taken at least five years after you establish a Roth IRA and you are age 59 or older, or you meet another exception. The reason is because the money you contribute is after tax income.

Another benefit of the Roth IRA vs a traditional IRA, the Roth IRA does not require you to take RMDs (required minimum distributions) at age 70. Your assets can keep compounding tax-free in your Roth IRA and then could be passed to your beneficiaries income-tax-free no matter how large the account grows.

Is a Roth IRA Conversion right for you?

Roth IRA conversions can have many benefits, however they are not necessarily right for everyone. A consideration must be made for the tax implications associated with the conversion. It is highly recommended to speak with your tax adviser before making this kind of decision.

Below are a few questions that can help you determine whether a Roth conversion strategy would make sense for you.

You may want to consider a Roth IRA conversion if you answer "yes" to most of the questions.

1. Do you have funds available outside your rollover accounts to pay the income taxes that would become due?
2. Does your portfolio strategy include increasing your tax-free savings amounts?
3. Do you have current investments in traditional IRAs or other employer-sponsored retirement plans?
4. Is reducing the taxable value of your estate one of your objectives?
5. Do you think you will be in a higher tax bracket or have a higher tax rate when you retire?

Here is a list of the types of accounts eligible for conversion.

* Traditional IRA
* Rollover IRA
* SEP IRA
* Assets in tax-qualified retirement plans 401(k), 403(b), 457(b), profit sharing and money purchase plans
* SIMPLE IRA (after being held for 2 years)

If a Roth IRA conversion looks like it might possibly be right for you, it is highly advisable to discuss the matter with a qualified tax adviser before taking any action.

Most important is that you are saving enough and investing your money wisely so as to capture the best returns on your portfolio. If you have not been happy with the performance you have been getting or aren't sure just how to make it better, visit my site below where you can hear about a program producing above average returns with controlled risk.

About the Author:
Recently retired from over 30 years as a medical sales representative. For almost 34 years I have been studying and using the stock market to grow my retirement accounts. Now I would like to use that knowledge to help others reach their retirement portfolio goals using a program I developed that produces above average returns with low risk. To learn more about this program, click on this link.

EasySavingandInvesting



Article Originally Published On: http://www.articlesnatch.com


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