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Should You Convert to a Roth IRA?


Previously, if your adjusted gross income was $100,000 or more, you did not qualify to convert your tax-deferred savings to a Roth IRA. But this income restriction has been eliminated, so everyone is now eligible to convert to a Roth IRA.

You can roll over amounts from your traditional IRA and from eligible retirement plans, which include qualified pension, profit sharing or stock bonus plans such as 401(k)s; annuity plans, tax-sheltered annuity plans; and deferred compensation plans of a state or local government. You do not have to roll these into a traditional IRA first.

Of course, you will have to pay income taxes on the amount you convert; it will be included in that year's income. But when you consider the benefits it may be worth it.





This is an excellent opportunity, but make sure you evaluate your situation and run the numbers before you make a decision. Consider how much you would pay in income taxes. Are you currently in a low tax bracket? Will your retirement tax bracket be the same or higher than it is now? Can you pay the tax without dipping into your tax-deferred savings? Did you make any non-deductible contributions that won't be taxed when you convert? Do you want to eliminate your required annual distribution? Should you convert some or all of your tax-deferred savings?



This is an appropriate time to get advice from a qualified professional who has experience in this area. There may be a substantial amount of money involved, and while you certainly want to take advantage of this opportunity if it applies to you, you also want to make sure you act wisely.

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