The Roth conversion - Read all about it

In case you have not heard, 2010 may be the year to convert your traditional IRA to a Roth IRA. The reason for this is that the requirement that the taxpayer’s modified adjusted gross income is less than $100,000 has been lifted. In addition, for conversions occurring in 2010, taxpayers may report one half of the resulting tax in 2011 and the remaining half in 2012. Taxpayers can, of course, pay all of the tax in 2010. These changes were included in the Tax Increase Prevention and Reconciliation Act of 2005 (signed into law by President George W. Bush on May 17, 2006).

Much has been written on the Roth IRA conversion. The financial services industry has used the changes in the rules as an opportunity to bombard investors with information about conversions. The big financial firms hope to capture assets that may be both converted and moved from one firm to another. However, it is not just investment companies that are pounding the drum about the Roth conversion. Business magazines (Money, Kiplingers, Business Week, Forbes, Fortune), financial journals (The Wall Street Journal, Investor’s Business Daily, and local business journals) and investor web sites (Bank Rate, Money Central, Motley Fool, Market Watch) have all written about the subject. A quick Google search for “Roth IRA conversion” returns 1.54 million results. Even the non-business media have stepped into the debate. I was interviewed last week by The New York Times for an article by Tara Siegel-Barnard “New Rules Ease Roth Conversion, but Benefits Vary.” http://www.nytimes.com/2010/01/09/your-money/individual-retirement-account-iras/09convert.html

So, what should you know? The decision to convert must be weighed by every individual. There are so many variables involved, that there is no clear answer for anyone. If you are considering converting some or all of you Roth, sit down with an expert (CPA, tax attorney or CERTIFIED FINANCIAL PLANNER™ and explore your situation carefully.