In 2007, rollovers from an employer plan can not go straight to a Roth IRA. Instead, you'll first have to rollover funds into a traditional IRA. Once in the IRA you can immediately do a Roth conversion.
But thanks to the Pension Protection Act of 2006, it will soon be easier to convert your retirement savings to a Roth IRA. Beginning in 2008, funds from your employer sponsored plan can be directly rolled over into a Roth IRA.
Income limit (AGI) is $100,000 though until 2010 when the income restriction is lifted.
Should you convert? It depends. If you are young and have lots of time and can pay the taxes with "other" money and not the ROTH money then these circumstances do favor a conversion.
Remember: If Congress revamps the tax system and goes to a flat consumption tax, then all income from retirement plans will be taxed when spent. Another tax advantage out the window. Likely? Doubtful but keep your eyes and ears wide open. Nothing is guaranteed except the known tax deductions you get today and with ROTH's your contributions are not deductible. Still it is better to have both tax-free potential growth and tax-deferred so you have options in the future.
Worst case is that if Congress switched to a flat consumption tax there would be a transition period or maybe a grand-fathering of these wonderful savings vehicles but how it would all work and how to keep track is too hard for my brain to contemplate right now.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.