If you are retired or have a low taxable income you might benefit from converting some IRA money to a Roth IRA this year. To be eligible for a Roth conversion, your adjusted gross income must be below $100,000.
If you have an adjusted gross income above $100,000, then next year you will have a chance to convert. Starting in 2010, the existing $100,000 income test for converting a traditional IRA to a Roth IRA will no longer apply. Another benefit to converting in 2010 is that taxpayers can elect to defer the related income and spread the income equally over the next two years,
2011 and 2012.
A Roth IRA conversion is potentially a big deal. Many IRAs have declined in value over the past year and converting while the account value is down gives you an opportunity to pay less taxes on the conversion.
Before making a conversion you should talk to your tax advisor to make sure you are eligible and that it is in your best interest.
For further reading:
- Check out the white paper published by our firm called Tax-Free Investment Earnings for Life!?
- There is a nice article by Kelly Green on Yahoo Finance called Making a Good Deal for Retirement Even Better.