Roth IRA Conversion: Is It Right For You?

The Roth Individual Retirement Arrangement (IRA) allows non-deductible contributions and tax-free accumulation and withdrawals.  Beginning in tax year 2010, you may regardless of your income, convert a (tax-deferred) Traditional IRA to a Roth IRA. However, should you?  Roth IRA conversions can be complicated but here are three simple rules of thumb:

  1. If you expect to pay a higher tax rate in the future on traditional IRA withdrawals, then you should consider doing a Roth conversion now at the current lower tax rate.
  2. For maximum benefit, you should pay for the conversion taxes with non-IRA money.
  3. A person who has no IRAs, and has too much income to do a direct Roth contribution should consider making a non-deductible Traditional IRA contribution and then doing a conversion.

Call Successful Portfolios at (800) 454-6419 for help with your IRA.  For spreadsheet jockeys who like to do their own financial modeling, download Successful Portfolios Roth Conversion Analyzer here:  (Excel File).


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