About 2010 Roth Conversions

Congress has given you a unique opportunity to convert your taxable IRA to a tax-free Roth IRA regardless of your income starting in 2010. Plus, if you make this decision in 2010, you can delay paying income taxes on the conversion until 2012 and 2013. What a great deal! But wait. Is is a great deal for you? Think about it:

• You’ll have to come up with the money to pay the taxes from somewhere (you really don’t want to use some of the taxable IRA to pay the tax bill!)
• Converting your taxable IRA might put you into a higher tax-bracket.
• Speaking of taxes, what if your tax rate when you retire is less than what it is now?
• Suppose you convert your taxable IRA in 2010 and then the stock market takes a deep dive. Then what?

This decision is not simple and in spite of what you might read, converting your taxable IRA to a Roth IRA in 2010 is not for everyone. You need to understand the bumps and potholes in this decision.