As of January 1, 2010, taxpayers with incomes exceeding $100,000 finally have the opportunity to convert their traditional IRAs and other qualified retirement accounts into a Roth IRA. Plus, people who convert during 2010 can elect to report the income from the conversion over the following two tax years.
What makes the decision to convert so appealing are some of the unique benefits available to Roth IRAs, including:
- Tax-free growth
- No Required Minimum Distributions starting at age 70 ½
- No income taxation to beneficiaries on withdrawals from inherited Roth IRAs
We have addressed various aspects regarding Roth Conversions in many of our newsletters during the past fifteen months. To find out more about whether this strategy might make sense to you, please check out the following articles:
- Caveat for Roth Converters (May 2010)
- Memo on Roth Conversions (January 2010)
- Minimize Taxes On 2010 Roth Conversion With IRA Roll Out (December 2009)
- Should You Convert To A Roth in 2010? (May 2009)
- 2010 Version Of Our Roth IRA Conversion Quiz (May 2009)
The decision to convert existing retirement accounts to a Roth IRA carries tax ramifications that not only affect you now and down the road, but also impact your beneficiaries who someday stand to inherit your retirement accounts. If you have existing IRAs (traditional IRAs, rollover IRAs, SEP-IRAs, SIMPLE IRAs) and/or 401(k) or 403(b) accounts held with a former employer (or a current employer that allows in-service distributions), and are considering converting some or all of those assets to a Roth IRA, please contact your tax preparer or one of the MDTAXES CPAs so they can help you work through a detailed analysis prior to your making a final decision.