When it comes to investments, you should always be well versed on the rules and guidelines that come with any investment that you make. It is going to be critical to your success and your ability to maximize your profits to know what you can and can’t do, as well as what you should and shouldn’t do. When you’re working with a Roth IRA, one of the hottest topics is Roth IRA conversion. The rules have always been the same, but they are undergoing a big change in 2010 to allow more people to contribute, convert, and enjoy their retirement savings.
It doesn’t matter if you are going to be using a 401K or a traditional IRA to convert, because Roth IRA conversion is going to be the same no matter what you are converting from. There previously was a cap of $100,000 on the AGI (adjusted gross income) of converters and Roth IRA holders for contributions, but in 2010 this limit becomes nonexistent. This is a big benefit for those who earn more money to make the most of their investments and earn some tax-free retirement money by investing in a Roth IRA. If you wait until 2010, the market appreciation will come into play and you might end up paying more income tax. Therefore, under this rule, you are able to convert now if you want to do so.
Due to this Roth IRA conversion change, taxes won’t have to be paid on the money that you convert in 2010. You can instead defer the tax, paying 50% of it in 2011 and 50% in 2012. This is the only time that this will be applicable, so make sure that you keep it in mind. Another thing to consider is that you can convert now, but the income limits and regulations for contributions have not changed. Therefore, if you are beyond the limits of contribution to your Roth IRA, you will have to find other ways to contribute. Consider a non-deductible IRA to start with, which you can then transfer to a Roth IRA immediately to enjoy the tax savings and fewer rules that come with it.
Being able to benefit from the Roth IRA conversion rule change can help many people save more for retirement. Keep in mind that the income rules still apply to contributions, and you will need to discuss your options with your financial advisor. Every situation is different, and your specific circumstances need to be considered to find the best solution for your investments.
NDH Group, Ltd. of Chicago recently released “RothCalc2010” for the iPhone. RothCalc2010 will help you determine whether to convert your traditional IRA to a Roth today, you can find it at the Apple App Store.
If you convert your regular IRA to a Roth IRA and you are older than 59.5 and you have had money in the regular IRA for more tha 5 years, do you have to wait another 5 years after the conversion to the Roth IRA before you can get your money out of the Roth IRA?
Presumably your regular IRA has been growing such that not all of the money in the regular IRA has been in the IRA for 5 years. If you could remove money from the Roth IRA immediately after conversion from the regular IRA. how would you determine how much of it could be with drawn?