Winter 2010 | Volume 108 | Number 654
2010: Year of the Roth Conversion
Traditionally, an IRA rollover is when you transfer funds from one qualified retirement plan – like a 401(k) – into a traditional IRA that allows continued tax-deferred growth.
Up until this year, you couldn't convert a traditional "tax later" IRA to a "tax never" Roth IRA if your modified adjusted gross income topped $100,000. But the government has indefinitely lifted that income restriction beginning in 2010.
If you switch, you'll have to pay taxes on the amount you convert. But if you think your tax bracket will be the same or higher when you retire, a Roth IRA might make sense. At 59½ (as long as the Roth IRA has been open for at least five years from the time of conversion), you can start making withdrawals with Uncle Sam getting nary a penny.
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