If you're anything like me, summer brings back fond memories of three months of fun. No classes or homework; just long days of doing exactly what you wanted.
OK, doing what Mom and Dad said you could do.
Those memories are probably why every summer I think about retirement.
Nowadays, the only way to get a retirement anywhere near the security of your carefree summer days of yore is to sock away cash now, either in your workplace 401(k) or similar plan, as well as in an individual retirement account.
This year, because the $100,000 income limit no longer prevents anyone from converting a traditional IRA to a Roth IRA, Roth accounts are getting a lot of attention. You've already read several stories here on the ol' blog. (Some reminders are listed below in "related posts" if you want a refresher.)
Well, here's another one.
The table below is from a session at the National Association of Tax Professionals annual conference that I'm attending here in Austin this week. It's from "2010: The Year of the Roth," presented by Delmar Gillette of Economic Planning Services in Newport News, Va.
|Expects his/her tax rate to be lower in retirement |
Does not have any outside assets available to pay conversion taxes
His/her projected income needs are equal to or greater than expected Required Minimum Distributions (RMDs)
|Expects his/her retirement tax rate to be higher |
Has outside resources to put toward conversion taxes
His/her projected income needs are less than expected Required Minimum Distributions (RMDs)
The key in your Roth conversion consideration, as is usually the case with anything connected to taxes, is evaluating your own personal financial and tax situations. This table gives you some things to think about when you do just that.
You also might want to check out my Bankrate Taxes Blog post on Roth Conversion Costs.
What you, I and millions of other retirement account holders do with our IRAs this year thanks to the broadened conversion eligibility will affect not only our post-work bank accounts, but also the Treasury's bottom line in years to come.
- Midyear tax tip #7: contribute to your retirement accounts
- Are you ready for a Roth conversion?
- Handy retirement plan rollover chart
- Roth IRAs and your retirement income
- Getting your rocking chairs on the same porch
- Get ready to retire
- Fading 401(k) company matches
- 401(k) Do's and Don'ts
- Taxes and the older filer
- Wisconsin tax tidbit: Roth conversions
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