retirement
Missed Roth IRA conversion?
Dear Dr. Don,
I am 45 years old and have about $500,000 in a traditional IRA. With the new tax laws, I am wondering if it is a good idea to convert to a Roth IRA? Any taxes I would pay out of other funds I have.
-- Lou Lumpsum
Dear Lou,
I'm not sure which "new" tax laws you're talking about. Is it the recent decision to extend the Bush tax cuts out until 2012, keeping the top marginal federal income tax rate at 35 percent? Or are you talking about the 2006 change in the tax law that removed the income limitations allowing all taxpayers to convert to a Roth IRA starting in 2010?
It's likely you missed the window to convert in 2010, which would have allowed you to spread the taxes on the conversion over the 2011 and 2012 tax years. I say likely because the distribution should have taken place in calendar year 2010 with the monies deposited into a Roth IRA within the 60-day window to complete the conversion. When making decisions about this much money, it would be a good idea to involve your tax professional.
Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.
Ask the adviser
To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.
Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.
Create a news alert for "retirement"