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Roth IRA and new conversion rules

Shared by Sara on Tue Jan 12, 2010 3:53 am
Till last year, people with modified adjusted gross income of $100,000 or less were able to convert their traditional IRA accounts into Roth IRA. However, with the starting of 2010, the rules have changed. Everyone can now convert their regular IRA account into a Roth account irrespective of their income. But, it should be noted that the income limits needed for people who are about to start a new Roth IRA does not change. Source: http://www.nytimes.com/2010/01/09/your-money/individual-retirement-account-iras/09convert.html

Community Members Opinion

marklavender1

Joined: 13 Sep 2009

Posts: 120

-0.14 Dollars($)

Posted: Tue Jan 12, 2010 9:55 am Post subject:

Finally it is individual choice. Tax, individual income & current need play a bigger role in selecting Tradiitional IRA or Roth IRA.

jerry

Joined: 17 Oct 2005

Moderator
Posts: 2615
Location: MICHIGAN

415.19 Dollars($)

Posted: Tue Jan 19, 2010 3:26 am Post subject:

Hi all, It's no doubt a good move by the Govt. as it'll help more number of people to convert their traditional IRA into Roth IRA. Now, even those with adjusted gross income of more than $100k will be able to take advantage of the conversion. Conversion of traditional IRA into Roth IRA is a good option. With traditional IRA, you can claim tax deduction now, but you will have to pay taxes when you take out money in future. Alternatively, on a Roth IRA, you will have to pay taxes on your present contributions. But it allows you to enjoy tax-free withdrawals in the days ahead. Moreover, Roth IRA does not require you to take out required minimum distribution at the age of 70½. Thus, you can keep the money in your Roth IRA and use it at the time of emergency, if any, in future. In addition to that, your withdrawals will not be considered as your income and will not affect your Social Security benefits. However, you should also keep in mind that if you convert your traditional IRA into Roth IRA, you need to keep the Roth account open for a minimum of 5 years before you take money out of it. If you withdraw prior to the 5 year period, you will have to pay penalty. Thanks, Jerry


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