You can learn about the advantages and disadvantages of converting Traditional IRA funds, paying the taxes and then allowing them to grow tax-free in a ROTH IRA from many websites.
I will not go into the details here, but it is not a slam-dunk and may, indeed, not be wise until you run the numbers for your specific situation.
Two points to consider:
(1) As the tax law is today, when you retire, your Traditional IRA may, indeed, NOT be taxable. That's right. For example, for a married couple in 2010, nearly the first $20,000 (rounding a bit) of income is in the zero tax bracket. These brackets are currently indexed to inflation, so if you plan to withdraw your Traditional IRA money out in increments around 20 years from now, you may be able to withdraw as much as $40,000 per year tax free.
(2) There are property rights in America that are respected. However, your right to tax-free income from the ROTH is not a protected right. Who knows what Congress will do to your ROTH value's tax-free right in 20 years? Convert to a ROTH in 2010, pay tax now and, maybe pay tax later, too. Run the numbers and you may surprise yourself (don't forget to calculate the future value of the taxes paid to convert - and, of-course, those funds would not come from the Traditional IRA but another source, for sure).
Thank you Congress for keeping financial planners in business. A good one can help you.
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.