Roth IRA Conversion
Should I be considering a Roth conversion?
Starting this year 2010 everyone is eligible to convert to a Roth IRA. It is my personal belief that everyone with an IRA or former employer retirement account should consider converting. If you take a look at this chart you see how income taxes have changed since the inception of the income tax in 1913. We are at or near historical lows when it comes to income tax rates and it is certainly not clear at this point whether they will last into next year for all taxpayers. When you consider that the federal government is running a trillion and a half dollar deficit and that social entitlement program expenditures will be growing with the aging baby boomer population I don’t see how any rational person would not want to eliminate a portion of their taxes from their retirement accounts. However there are many factors to consider when it comes to paying the tax bill. Not the least of which is will the conversion income push me into a higher tax bracket? The conversion income will also affect itemized deductions, credits, tax on SS, college tuition credits and aid and AMT to name a few. This is also why a Roth conversion calculator found on the web will be useless for making a conversion decision so please do not rely on them.
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