Jan 072010

In 2010 more people will be eligible to convert to this type of account, which offers tax-free retirement income. Since 1997 the Roth IRA has offered an appealing option for retirement saving. Contributions aren’t tax deductible, but withdrawals during retirement are not taxed. And because you’re not compelled to take mandatory distributions, you can choose to pass along your account untouched to your heirs.

The one major drawback to Roth IRA’s has been their income ceiling. High earners (anyone whose income exceeds $176,000) have not been permitted to contribute to a Roth, and those who make more than $100,000 are barred from converting a traditional IRA to a Roth. But these rules change in 2010, when the IRS lifts the income restriction on conversions. While you will owe income tax on any retirement plan balance you convert, a Roth’s special features could make converting from a traditional IRA a sensible strategy.

Recent market turbulence may have one silver lining: a lower account balance means a lower tax burden; and for accounts switched to a Roth in 2010, you may spread your tax liability over two years.

Contact Wendy Kouvaras, Financial Advisor to talk about the benefits and risks of converting to a Roth IRA. There are many things to consider before making a decision to convert or not.

Wendy Kouvaras

Financial Advisor Merrill Lynch


Email: wendy_kouvaras@ml.com


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