Roth IRA Conversion

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Posted on 17th September 2009 by Rita in 401k |IRA |Retirement and Estate Planning

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This just may be what your 401k needs.

2010 will be here before we know it. With all the uncertainty that we are experiencing these days within the financial realm one thing that IS CERTAIN pertains to the Roth IRA. The 2010 conversion period is just around the corner. To help with understanding what your options are and the NEW 2010 eligibilities here are some things to consider when making a decision about your IRA.

Traditional IRA (pay taxes later) -vs- Roth IRA (pay taxes now)

Both IRAs provide a way to save for your future

So which one is better? In this comparison your answer is: Go with the one that will let you pay your taxes at the lowest rates. If you expect your tax bracket to be lower today then in the future, then a Roth IRA Conversion is a good idea for you right now.

Traditional IRAs are funded with your pretax dollars so your tax bill is deferred until the money is withdrawn in your retirement years. Your contributions may qualify as deductible contributions which reduce your taxable income in your Traditional IRA.

Roth IRAs tend to be funded with after tax dollars so your withdrawal dollars are federal tax free at the age of 59 1/2 . So ultimately all of the future gain will be tax free, provided you have had the Roth IRA for 5 years, your distribution age is 59 1/2 or funds are for a first time home buyer.

2010 opens the door to more people for the Roth IRA Conversion. The Adjust Gross Income limit which has been at $100,000 has been lifted for 2010. More good news, is those taking advantage of this 2010 conversion period will be able to spread out the time in which you report your income. Therefore you can report half the income from the conversion in 2011 and the other half in 2012, spreading out your tax obligation.

Contact your North Coast Life Representative to learn what option is best for you and your situation. 800-541-5858

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