Roth IRA Conversions in 2010

I would like to alert you to a tax law change with regard to Roth IRA Conversions.

In 2010, any retirement plan from a previous (not current) employer, IRAs and nondeductible IRAs can be converted to a Roth IRA without limit. Previously there were income limits that effectively blocked many individuals from converting.

Income taxes will be due on the amount transferred. However, income tax on the conversion can be paid over two years - in 2011 and 2012.

The savings occurs during your retirement when all principal and earnings distribute tax free. This is an opportunity to actually beat Uncle Sam because you won't pay any income tax on the future earnings that accumulate in your Roth IRA.

If you don't currently have any IRA account, you still have time to accumulate $10,000 by contributing $5,000 to a nondeductible IRA in both 2009 and 2010 and then converting it to a Roth IRA in 2010. If you are married, you can double it.