• Welcome to BGO! We know you will have questions as you become familiar with the software. Please take a moment to read our New BGO User Guide which will give you a great start. If you have questions, post them in the Feedback and Tech Support Forum, or feel free to message any available Staff Member.

Changing your Traditional IRA to a Roth IRA in 2010

Happy hour starts in 5 minutes

Pravda

Guest

Have any of you guys done this this year?

Seems to be a really good way to go as all gains in perpetuity on the Roth IRA are tax free--if I've got my facts straight.
 

Lanky Livingston

Guest
I want to start doing Roth IRAs, but not really sure how. So no, I can't help - sorry!
 

Sarge

Guest
I did mine a few years back. Can't remember the exact bennies, but it made sense

Lanky, most banks have programs to start IRA's. Call whoever you bank with and see if they have them.

The trick is to fuly fund them if you can. Tax free money baby!
 

Pravda

Guest
Sorry guys--I should have been clearer in the OP. I have converted my traditional IRA to a Roth IRA. In doing so, I did create a tax liability for myself--i.e., to the extent I didn't have basis in the assets in the IRA (whether via non-deductible IRA contribution or otherwise), I had to pay tax as though the assets were ordinary income.

However, by accelerating the tax burden, I paid the tax now on my IRA which means that all withdrawals once I reach 62.5 (or 65, I don't recall which) will be tax free instead of taxed as ordinary income.

The downside is that there's tax liability now, but the upside is that all of that money grows (and can be withdrawn at retirement) tax free.

I ran the numbers in Excel and it made a lot of sense to me.

I don't know if this would make sense for everybody, but perhaps a conversation worth having with your financial adviser.

This year and I believe 2011 are the only years where there's no limitation on conversion of traditional IRAs to Roth IRAs.

Hope this is helpful. :)
 

China

The Team Captain
Joe Gibbs Club Member
Joined
Aug 3, 2009
Messages
2,677
Reaction score
22
Points
68
Location
Falls Church, VA

Michigan State

Thanks for the reminder, I started this process but need to complete the conversion.
 

Users Who Are Viewing This Thread (Total: 1, Members: 0, Guests: 1)

Private conversations
Help Users
    Top