The basics are that you will be able to convert all of your regular IRA-type accounts over to Roth IRAs during 2010, regardless of your income level. The million dollar questions is, “Is it a good idea?” … and I can’t provide an answer to that question.

So, what good am I? Well, I brought it up didn’t I? Ok… actually, I’m willing to be the “go-fer” between my clients and their accountants… but they and their accountants have the ultimate say  whether it’s a right thing to consider… that’s what good I am.

Just to get the ball rolling, I stole an article that’s got way too much detail about the whole issue… It might be confusing to us mere mortals, but your accountant will probably be interested in it. So, read – copy – print the attached article and then pass it on to your accountant.

First…

Our rich Uncle Sam, in his efforts to help soften the blow of the stock and bond mess we’ve all experienced over the last year or so, has waived the Required Minimum Distribution for 2009. I IMPLORE YOU… if you do not absolutely, positively NEED your RMD to keep the lights on, PLEASE do not take the distribution. This is a GIFT… (another) from your Rich Uncle Sam… do not look it in the mouth.

Second…

2010 is the year of the Roth IRA conversion. This can be a tricky one, but the basic difference between a Roth IRA and a regular IRA is that Roth IRAs are the opposite of regular IRAs… their contributions are not tax deductible, but their withdrawals are tax free. The catch is that there are income limits on who can contribute to a Roth IRA… so most of my clients and others who I work with demographically, we have usually not been able to throw Roth IRAs into the mix…. EXCEPT:

THE LOOPHOLE…. during 2010 ONLY, regular IRAs can be converted to Roth IRAs FOR ANY INCOME LEVEL… not just the restricted lower income limits. You will have to pay taxes on the amount converted, but that will be it forever…. No required minimum distributions, no taxes on withdrawals, no affect on your Social Security Income if you have a pretty beefy IRA account.

Given that the taxes on your IRA can also be spread out over three years (2010 ONLY, AGAIN) and the investment markets may have handed you a fairly low valuation point for conversion, this just might be the best news you’ve gotten in a while.

It’s complicated and unique to each individual’s situation, so I will be working with my clients and their accountants over the next few months to help them decide if it is right for each of them. If you are not a client and would like additional information, contact me at 480-575-7688 and I’ll hook you up with the right people.

Photo: Robert D. Gary