| IRA Conversions |
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| Written by John Corn |
| Thursday, 03 September 2009 00:00 |
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Page 1 of 4 Overview: Starting in 2010, the income limits for converting a traditional IRA to a Roth IRA will be eliminated. This will allow many previously ineligible investors to convert their IRAs and grow their retirement dollars tax free. Still, the rules governing conversion eligibility can be complex, as is the individual conversion decision. The following should hopefully shed some light on what investors should consider regarding IRA conversions.
Note: The information in this article is meant to raise awareness of the topic addressed and should not be considered tax advice. It is always important to consult a tax planner prior to engaging in actions that may have tax consequences.
Consider what The Wall Street Journal had to say about the change in the conversion rules: “The change — one of the biggest and most important on the IRA landscape in years — will widen the entryway to one of the best deals in retirement planning. With a Roth IRA, virtually all income growth and withdrawals are tax-free.”1 The intricacies of such a significant change can be complex, but the following should provide a basic overview of some of the larger items to consider about IRA conversions.
It is important to note that the limits being eliminated are specifically for conversions. The limits regarding who can contribute directly to a Roth IRA will still apply. Thus, investors who are over the limits and want to contribute to a Roth IRA each year would have to do so via conversion from a traditional IRA.
For 2009, investors who are married filing jointly see their contribution limits phase out once their modified AGI exceeds $166,000, and they lose their Roth IRA contribution eligibility with a modified AGI above $176,000. For those with a filing status of single or head of household, the limits are $105,000 and $120,000, respectively. |
| Last Updated on Thursday, 03 September 2009 15:31 |