Posted on 03 December 2009
By Mark Miller
Roth conversions are a hot topic headed into 2010 due to a change in federal law next year that lifts the household income limit for eligibility to convert traditional IRAs to Roth accounts. While converting can make sense, Charlie Farrell offers a sound set of reasons not to rush into a Roth conversion at CBS MoneyWatch.com.
“The basic analysis comes down to predicting future income tax rates,” writes Farrell, an investment adviser. “Essentially, if you think you’ll pay a lower income tax by converting today, as opposed to waiting and paying taxes in retirement, then you would convert.” But he goes on to list other important tax considerations, including your anticipated future tax bracket, distribution size and other taxes that come into play.
“The Roth IRA conversion requires multiple layers of tax and investment analysis,” he concludes. “Some people are using the conversion as a marketing tool, so take your time and make sure you pay for your own independent tax and financial analysis.” Via CBS MoneyWatch.com.