Roth IRA Conversion Q&A

Understand the change in tax law about to take place in 2010 in regard to Roth IRA's?

Below are some commonly asked questions in regard to Roth IRA’s and the conversion laws to take place in 2010.  Click the section to learn more.

Roth IRAs

• What is a Roth IRA and what are the benefits?

Roth IRA conversion basics?

• What is a Roth IRA conversion?
• What’s changing about Roth IRA conversion in 2010?
• Which accounts can be converted to a Roth IRA?
• Who can convert to a Roth IRA?
• Can I convert to a Roth IRA even if my MAGI is more than $100,000?
• What is a partial conversion?
• Can I put my converted assets into an existing Roth IRA?
• Will I need to sell and go to cash to convert to a Roth IRA?
• Do I still have to take a required minimum distribution from my traditional IRA if I convert it to a Roth IRA before then end of the year?
• I've heard from one source that converting to a Roth is always a bad idea, while another says it's always a slam dunk. So, which is it?
• With the stock market still well below its previous highs, is this a good time to convert to a Roth?
• How do I switch or convert to a Roth IRA?
• Is there a deadline for converting?

IRA contributions

• Where can I find my pre-tax contributions?
• How do find out how much in non-taxable contributions I have in my current account?
• Can I contribute to my Roth IRA once I’ve converted?

IRA recharacterization

• What is a recharacterization?
• Can I recharacterize and then reconvert an IRA?

Taxes

• What are the federal income tax implications of converting?
• What are the state income tax implications for converting?
• Why is it so important to pay the conversion tax from money other than my retirement account? Why not just pay the taxes out of my traditional IRA?
• What are the chances that the tax-free nature of a Roth IRA will be reversed?
• Given government deficits and the likelihood that income tax rates are heading higher, is now a good time to convert to a Roth IRA?
• Is the 2-year payment of Roth IRA conversion taxes a one-time deal?
• Do I need to pay taxes on traditional IRA gains when I convert to a Roth?

Estate planning

• Can converting to a Roth IRA be beneficial as an estate planning tool?
• If I leave my Roth to my heirs, will they have to pay income taxes when they take withdrawals?