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convert to Roth IRA
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Birthday & Do you regularly contribute to a your IRA to a Roth IRA. And you can. If your adjusted gross income
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Traditional IRA? If so, you’re taking may have two especially good op- is more than $100,000, you can’t
an important step toward building portunities to make this conversion make the conversion in 2009. Also,
(828) 645-2038
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Sun & Mon financial resources for retirement. in 2009 and 2010. keep in mind that any conversion
www.bakeshoppeasheville.com But it’s possible that you could take Before we examine why this may will require you to pay income
an even bigger step— by converting be so, let’s take a quick look at the taxes on your pre-tax contributions
differences between a Traditional to your Traditional IRA and any
IRA and a Roth IRA. Depending growth in your account’s value.
on your income level, your contribu- If you meet the income limits for a
Your home and auto policies
tions to a Traditional IRA may be conversion in 2009, you might want
tax deductible; regardless of your to consider doing so, because your
income, your earnings grow tax tax obligation for a Roth conver-
deferred. With a Roth IRA, your sion might be lower in 2009 than it
come with something extra...
contributions are never deductible, would have been in previous years.
but your earnings grow tax free, Following last year’s steep market
provided you’ve had your account for decline, the value of your IRA may
at least five years and you don’t start be down significantly — and, gener-
taking withdrawals until you’re 59½. ally speaking, the lower the value,
However, if your modified adjusted the lower the tax bill upon conver-
gross income exceeds certain levels sion. Furthermore, if your income is
($120,000 per year if you’re single somewhat dependent on the state of
and $176,000 per year if you’re mar- the economy, you could end up with
ried and filing a joint return), you lower earnings in 2009 — another
can’t contribute to a Roth IRA. factor that could lessen the tax im-
Here’s another distinction be- pact of a Roth IRA conversion.
tween the two types of IRAs: With Even if you don’t make the con-
a Traditional IRA, you must start version in 2009, though, you may
taking required minimum distribu- still want to consider this move next
tions (RMDs) when you reach 70½. year. In 2010 — and in 2010 only
But if you own a Roth IRA, you — you can convert your Traditional
are never required to take distribu- IRA to a Roth IRA regardless of
tions, so you can let your money your income level. Furthermore, the
grow as long as you can afford not income taxes due on conversion can
to touch it. be spread over two years — 2011
Which IRA is “better”? There’s and 2012.
no one right answer for everyone. So contact your financial and tax
Generally speaking, though, the advisors to determine if a Roth IRA
combination of potential tax-free conversion is appropriate for you.
earnings and no RMDs might make Over the next two years, you’ve got
the Roth IRA an attractive choice a good window of opportunity to
for most people. Additionally you make this move — so you’ll want to
have access to the money you put act before that window closes.
into the Roth tax-free and penalty-
free at any time, as long as you are This article was written by Ed-
not withdrawing earnings. So, if you ward Jones for use by Bill Bough-
have a Traditional IRA, you might ton, Weaverville’s local Edward
wish to convert it to a Roth — if you Jones Financial Advisor.
p: 645-6300
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14 THE TRIBUNE - Feb 26 - Mar 4, 2009
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