Changes To Social Security Will Take Away Some Key Planning Strategies That Couples Used To Boost Their Total Benefits
As part of recent negotiations between Congress and the White House over the budget, major…
Part of the 2006 tax reconciliation bill is about to matter to many of us come January 1, 2010. It’s sort of a good-news/bad-news deal — but more good than bad for many. As of January 1, 2010, there will be no income limits for those who want to convert a traditional IRA to a Roth IRA. That’s good because in the past, households with an adjusted gross income of more than $100,000 have been barred from converting their IRAs to Roth IRAs, and married spouses filing alone have been barred regardless of their income.
As a quick refresher, Roth IRAs are retirement savings accounts where you pay the income taxes due up front (when you contribute to the account) — then, it grows tax-free and your withdrawals are also tax-free (but you don’t get the income tax deduction when you initially contribute the money).
So, for those of you whose traditional IRAs are now worth far less than they used to be worth (that’s the bad news part), converting to a Roth IRA in 2010 could be a great idea: Since the account is now worth so much less, the taxes on the conversion will also be much less than they might have been, and if tax rates go up in the future, as many predict they will, you’ll have already paid the taxes due on the account.
For a good analysis on the ins and outs of the new rules, check out this Wall Street Journal online article. And, as always, please contact our firm for advice tailored to your specific situation…happy reading!