retirement

Spouse won't sink Roth IRA conversion

Don TaylorQuestionDear Dr. Don,
I am considering a Roth IRA conversion for my retirement savings, but wonder if my husband and I can both have Roth IRAs for the same year. I was under the impression only one spouse can have a Roth IRA and the other spouse must then contribute to a traditional IRA.
-- Leigh Legal

AnswerDear Leigh,
What's sauce for the goose is sauce for the gander and vice versa. The choice between a Roth IRA and a traditional IRA doesn't depend on the decision made by a spouse.

That's true whether you're talking about spousal IRAs -- where a nonworking spouse can fund an IRA or Roth IRA with the working spouse's earned income -- or a two-career couple in which each member funds an account with his or her own earned income.

The tax code can limit the ability to make tax-deductible contributions to a traditional IRA and the ability to contribute to a Roth IRA. However, it's not the spouse's choice of account that places a limitation on the other spouse.

While there are still income restrictions on contributing to a Roth IRA, the income restrictions for converting to a Roth IRA have been removed. IRS Publication 590, "Individual Retirement Arrangements," explains the changes surrounding Roth IRA conversions in 2010:

Conversions to Roth IRAs. Beginning in 2010, the modified AGI and filing status requirements for converting a traditional IRA to a Roth IRA are eliminated. Also, for any 2010 rollover from an IRA other than a Roth IRA to a Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012. You can choose to include the entire amount in income in 2010.

If you're both considering converting your traditional IRAs to Roth IRAs in 2010, I'd recommend working with a tax professional to determine the expected tax impact of that decision and the advisability of the conversion given your age, income and goals for the retirement accounts.

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