Gold 401K

Gold Sep Ira Penalty
Gold Sep Ira Penalty

There has been a lot of talk recently about the 2010 Roth IRA conversion opportunity for tax payers. Is this a good idea or just another way for the government to raise tax revenue? The 2010 Roth IRA conversion will allow for tax payers that have a traditional IRA to pay the taxes and convert to a Roth IRA, in effect to go from a taxable account to a Tax FREE account. Sounds good on the surface but is this really a good opportunity?

Back in 2006 President Bush passed a $70 billion dollar tax cut that changed eligibility requirements for Roth IRA conversions. Beginning in 2010 tax payers with adjusted Gross income of more than $100,000 will be able to convert to a Roth IRA. This change will begin in 2010 and beyond, the tax payer however will be able to spread the tax burden over a two year period. So the taxes can be spread over 2011 and 2012.

Removing the income cap limits does not mean everyone can contribute to a Roth IRA but it does mean that everyone can convert from a traditional IRA to a Roth IRA.

Sounds good but s it?

For some people it makes a lot of sense for some it does not. You must look at different scenarios before you decide to make a conversion. For instance, will your tax bracket in the future be higher or lower at retirement when you would have to make minimum distributions for a traditional IRA. If your tax bracket will be lower when you take money out then a Roth conversion to Tax Free may not benefit you as much as someone who would be in a higher tax bracket.

Your age determines your decision as well, do you have the time to catch up the taxes you have to pay, remember you still have to pay the taxes to convert.

The ones that would most likely benefit the most would be those that have a sizable traditional IRA that does not need distributions and would like to leave a tax free benefit to there heirs, this scenario would make the most sense.

The point you must consider, look at the conversion by running different scenarios, you can find a Roth IRA conversion software program that can show you the pros and cons so make sure you find a qualified adviser that can help you decide.

Marquis Van De Mark is a financial adviser that writes on topics of interest. http://www.jetbandsaw.org/ as well as a link for the Jet Band Saw