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Tax cuts outlook spurs Roth conversions

It's looking more likely that the expiring Bush tax cuts will live at least a bit longer and that's starting to have a domino effect.

Golden_nest_egg_bank (2) Take Roth IRA conversions. With the elimination of the $100,000 income cap, anyone can now convert a traditional IRA to a Roth.

That also means that taxes on the converted retirement plan money, which were deferred, are then due.

Folks who convert in 2010, however, get the option to divide up their IRA-related tax bill and spread it equally over two future tax years, specifically 2011 and 2012.

When it looked like ordinary income tax rates, which apply to taxable IRA distributions, might be higher in 2011 and beyond, that conversion deferral didn't look so good.

But now that the odds are increasing that the tax rates will stay the same for a year or two, some people are taking the Roth IRA conversion plunge.

I go into more detail in my The rush to Roth IRAs post at my Bankrate Taxes Blog.

Check it out, as well as the related posts listed below, to help you decide whether it might be worth it to convert your traditional IRA to a Roth IRA.

Related posts:

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Roth conversion

I have read several articles about the Roth conversions now and it seems to boil down to: convert if you are more than 20 years from retirement or 70 1/2 and need access.

I'm so happy this is one financial thing I don't have to worry about (we're in our 20s and started with Roths). Now I can move on to worrying about my 401k, stocks, emergency fund, retirement….


Ted, I've learned over the years to never say never when it comes to what Congress might do. There is speculation that one day Roth accounts will be taxed if deficit spending can't be brought under control. Will Congress grandfather existing accounts? Possibly. Unfortunately, when it comes to taxes, we have to make decisions on what current law is. Kay


I have been reviewing this as an option. I learned about being able to split the taxes over a two year period while going through a self-directed IRA companies web site,

The real question that I have on this is will it really benefit me in the long run to move my Traditional IRA to a Roth now or do you think that the Roth rules will be changed at some point in the future?

Working Mom of 2

In "The Gospel of Roth- The Good News About Roth IRA Conversions and How They Can Make You Money" by John Bledsoe it clearly states in the book that NO ANALYSIS is needed and that everyone should convert to a Roth IRA regardless of income. There is NO risk! The IRS is giving us a year to recharacterize or "undo" the conversion. This book gives the ins and outs for Roth IRAS! It really helped answer all my questions.

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