Conversion of IRA's to a Roth
The current limit for conversion of regular IRA's to Roth IRA's is $100,000 per year. However, in 2010, there is no income limit for conversion.
Advantages:
- You can create tax free income in retirement
- Makes sense if you will face the same or higher tax rates in retirement
- Bush tax cuts are due to expire in 2011, deficit makes it unlikely they will be continued
- Leave a larger legacy to your heirs
- Not required to start withdrawing money at 70 1/2
- Not counted in calculation of Social Security taxability
Disadvantages:
- Conversion increases taxable income, may boost tax bracket
- If you use the proceeds to pay the taxes, you will have fewer dollars growing
- Must have funds available to pay taxes
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