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Are you ready for a Roth?

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.

Roth Candidate

Everyone Else

Roth Candidate

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)

Households that
do no fall into either "candidate" category must decide
whether converting
a traditional IRA
to a Roth IRA
is appropriate
based on
personal income
and tax facts
and circumstances

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.

Related posts:

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If only it were this simple.
Say I'm in the 25% bracket today. I have a crystal ball. I will be in the 28% bracket at retirement. Convert?
Hardly. Who can say what will happen each and every year between now and then? For those convinced they'll be retiring in a higher bracket, this is the next question to ask. I have no stats, but I'm sure someone must. Unemployment, underemployment, time back in school, time caring for an elder, etc. So many situations one's bracket may be lower some time in between.


I wonder how it works with the estate tax? (death tax). There's some information about Roth IRA Tax at

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