What to do if Bush tax cuts expire

Retirement accounts are a large part of most portfolios. Consider making one of those retirement plans a Roth IRA in light of a 2010 tax law change and possible higher tax rates.

While traditional IRA distributions will be taxed at ordinary income tax rates, money taken out of a qualified Roth IRA is tax-free. Such a switch could be a good move if you expect to be in a higher tax bracket when you retire.

Traditional IRA to Roth conversions also are now available to anyone, regardless of income. And for the 2010 tax year only, you have the chance to defer any tax you might owe on the conversion and pay it in equal installments with your 2011 and 2012 tax filings.

"At first blush, it is an incredible opportunity," says Certified Financial Planner Cass Chappell of the conversion tax deferral option. However, individuals who are now in or expect to be in a higher tax bracket in coming years might want to pay all the tax due at the 2010 rates instead of possibly facing a 35 percent or higher tax rate, says Chappell of Chappell, Mayfield & Associates in Atlanta.