Consider ROTH

As 2009 is quickly passing, we may wish to seriously consider converting Traditional IRA to a Roth IRA. You may want to convert a part of it before December 31st. Then convert
the remaining in 2010. Here's why:

Number one - Due to economic crisis, Congress has passed H.R. 7327, the "Worker, Retiree, and Employer Recovery Act of 2008." This new law allows an account holder avoid what would otherwise be a Required Minimum Distribution (called "RMDs") in 2009. So, why not convert the amount you should have taken as RMD it to ROTH. Hey, you are already used to paying taxes on that amount. Ask your Financial Adviser to do the Math for you. This might make good sense.

Number two - If you are in a high tax bracket now and you think your tax rate will go up tomorrow, converting to a Roth may make sense. Taxes are expected to rise in the next few years, so even if you expect your income to remain the same at retirement you're still better off converting now.

Number three- Do you want to leave a loving legacy to your beneficiary by passing along a non taxable asset? Though, your beneficiaries may have to pay estate taxes on the value of the ROTH IRA, no part of the ROTH IRA will be subject to income tax.


Starting in 2010, the income limit (MAGI- Modified Adjusted Gross Income) on Roth conversion will dissappear thus, providing a backdoor way for IRA account holders to convert to ROTH. Moreover, account holders who convert in 2010 will be allowed to pay part of the tax bill in 2011 and the remaining in 2012.






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