Retirement Plans: Evaluating the New Roth IRA Conversion Opportunity
Starting in 2010, investors have the option of converting all or part of their money in a traditional IRA (Individual Retirement Account) into a Roth IRA regardless of how much they earn.
Until now, such conversions could be done only by those with modified adjusted gross incomes of $100,000 or less. This change is especially timely, given the growing number of Baby Boomers retiring in the near future and likely rolling over their nest eggs from their 401(k) accounts into IRAs.
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Whether you are years from retirement or even approaching retirement, you may find it worthwhile to consider a Roth IRA conversion—either for yourself or to potentially leave tax-free assets to heirs.
The advantages include:
- The converted assets—“the principal”—in the Roth IRA can be withdrawn tax-free at any time;
- Any future earnings in the account are also tax-free (with some limitations); and
- The account owner will not be required to take any minimum distributions in retirement.
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