What You Need To Know About New Roth IRA Rules

Roth IRA’s are a great way to save for the future. For those unaware a Roth IRA is just a different spin on the traditional IRA. Instead of seeing tax benefits up front – such as when you contribute to an IRA – you see your tax benefits on the back end: when you actually withdrawal from your Roth IRA. This can be a powerful way to avoid income taxes in your retirement, especially if you foresee income taxes being higher when you retire then they are today.

In 2010 there will be new rules for the Roth IRA. Starting next year the government is going to make it easier to convert a traditional IRA into a Roth IRA. Historically conversions were only an option if your AGI (adjusted gross income) was less than $100,000. This income limit is going to vanish in 2010. Another great option being given to us is the ability to spread out taxes on conversions implemented in 2010. You are being given the option to split the taxes payable due to the conversion between your tax returns for 2011 and 2012.

This is a great opportunity for those who are interested in converting an IRA into a Roth IRA in order to diversify their future retirement portfolio (and their future tax payments). I’d recommend meeting with your financial advisor for more information on the upcoming conversion and to see if a Roth IRA is right for you!

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