A. A traditional IRA is a joint retirement account and a ROTH IRA is an individual retirement account.
In 2010, there is no income limit to convert from a traditional IRA to a Roth IRA, Lowlicht says.
Whether a Roth IRA will beat a conventional IRA depends on a lot of factors, such as changes in your tax bracket and your investment opportunities.
With a traditional IRA, the taxes are paid when you withdraw the money (in retirement), whereas with a Roth IRA, the taxes are paid up front.
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If you inherited a Traditional IRA from a person who had a basis in the IRA because of non-deductible contributions, that basis remains with the account.
One of the more common tax management questions, at least in recent years, is whether to convert a traditional IRA to a Roth IRA also called a Roth conversion.
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However, there are no income limits for contributing to a nondeductible IRA, and any taxpayer can immediately convert a nondeductible IRA to a Roth IRA regardless of income.
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There are income limits associated with both deductions for a Regular IRA, and for making a contribution to a Roth IRA. Presumably these prevent the rich from enjoying too much of a good thing.
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In a Roth conversion, you withdraw money from a traditional IRA, pay all the federal and state taxes due, and move the funds into a Roth IRA, where all future growth and withdrawals are tax-free.
Similarly, a rollover from a pre-tax 401(k), 403(b) or 457(b) plan into a traditional IRA also qualifies, as well as a rollover from a SIMPLE IRA and SEP-IRA to a traditional IRA. Rules and restrictions apply, so keep reading.
Effective Jan. 1, the federal government dropped the income limit for transferring savings to a Roth IRA from a traditional IRA or an employer-sponsored retirement plan, making it easier for people with higher incomes to take advantage of Roth accounts.
For non-deductible contributions to a traditional IRA (where you make too much income to qualify for a deduction), or regular contributions to a Roth IRA, or saving in a taxable account, you pay income tax as you earn the money, regardless of what you do with it.
But, you can make a contribution to a nondeductible Regular IRA and immediately convert it to a Roth IRA. Why the IRS would allow this is beyond me.
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This will give you an opportunity to convert money from your regular IRA to a Roth IRA while in a lower-than-normal federal and state income-tax bracket, says Mr. Baldwin.
And since he is eligible for a retirement plan at work, he is not eligible for a deductible IRA for himself or, assuming the couple files a joint tax return, a deductible spousal IRA for his wife.
That way, they can also suck-in all those small investors who think converting the remains of their IRA into a Roth IRA and paying taxes to do so is a smart move.
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Last summer, when it seemed that the ads about turning your paper IRA into a solid gold IRA hit a fever pitch, gold began to go vertical.
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By contrast, IRA assets converted to a Roth IRA could be moved back to a traditional account, wiping out the tax bill.
In a conversion, you declare funds in a traditional pre-tax IRA taxable, pay the federal and state levies due, and then move the stash into a Roth IRA, where future growth and withdrawals are tax free.
Example: If you are eligible to convert your IRA into a Roth IRA, should you?
But a Roth IRA makes a great emergency fund (remember liquidity), says Rockville Centre, N.
Yes, or you can leave it in the 2007 IRA for a 2007 IRA contribution.
The in-plan conversion move can complement converting an IRA into a Roth IRA, or can be done instead.
Financial advisors spent a lot of time last year trying to convince clients to convert a traditional IRA to a Roth.
The conversion is a transaction in which you move money from a conventional IRA to an aftertax Roth IRA, a valuable asset.
Each year you can convert an amount from your IRA to a Roth IRA that will bring you just up to the top of your tax bracket (but not over).
For those people who would not normally be impacted by the law but are planning to convert an IRA to a Roth IRA, they too should consult their tax professional about doing it in 2012 to avoid being impacted by the new tax later.
If your tax bracket is likely to go up over the next decade (it is for many upper-income folks), and you have plenty of cash sitting around, it may make sense to convert an IRA into a Roth IRA. You pay tax on the account now, but all future earnings and withdrawals are tax free.
The worst that happens is that you'll have a taxable IRA payout and a deductible charitable gift.
Consider converting some of your Traditional IRA assets to a Roth IRA if you are eligible to do so.
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