Converting a Traditional IRA to a Roth IRA

Do you want to pay the piper now, or later? Currently, only households making less than $100,000 a year or spouses filing jointly can convert their traditional Individual Retirement Account (IRA) into a Roth IRA. But as noted in a recent those restrictions will be lifted in 2010, so that workers of any income level can convert their traditional accounts to a Roth. T

raditional IRAs allow workers to save money tax free now and pay taxes when they withdraw their money during retirement. Roth IRAs, on the other hand, allow workers to pay taxes on retirement savings now and withdraw it tax free later. If you're not sure whether a Roth

IRA is right for you, check out the NCPA publications “To Roth or Not” and “Would You Benefit from a Roth IRA?

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  1. Michael says:

    The simple analogy is, “Would you rather pay taxes on your seed money or your harvest?” And a simple way to gauge your response is to the question, “Do you believe future tax rates are likely to be: Lower, The Same, or Higher?”

    Traditional Retirement Planning teaches us that we will be in a lower tax bracket in retirement, but many are finding that this is NOT the case.

    Those that choose to payoff their mortgages have 1) lost their mortgage interest deduction, 2) don’t have dependents living with them anymore, and if they are retired are 3) not contributing to their IRA/401(k) any more.

    All the deductions they had in their “earning years” are now gone, and with costs of living going up, are finding themselves in as high (or higher) tax bracket than they have ever been in because they have no deductions to offset the higher amounts of money they need to withdraw from their taxable accounts.