Articles on Converting to a Roth IRA

Here are a number of articles that I found on the net that discuss the pros and cons of converting a traditional IRA to a Roth IRA.

• April 4, 2010.  “The Debate Goes On: To Roth or Not to Roth?” – InvestmentNews:  “For the superwealthy, conversion is a slam-dunk; others should be more careful.  The following is an edited transcript of an InvestmentNews.com webcast held in New York on March 9.  . . . To listen to the archive of the webcast, visit Investmentnews.com/rothtranscript and click ‘View archive’.”  One of the panelists was Ed Slott, the renowned IRA expert.

• March 21, 2010.  “Many Wealthy Investors Reluctant to Do Roth IRA Conversions” – InvestmentNews:  “Many are ideal candidates, but they also face biggest tax bills.  Mutual fund companies are reporting a brisk business in Roth IRA conversions as a result of a change in the tax law, but there is one segment of the public that is decidedly cool to the idea, even though their financial advisers are urging them to take the plunge.  Wealth advisers said that a lot of their clients, many of whom would benefit the most from an IRA conversion, are rejecting their recommendation to convert their traditional individual retirement accounts or old 401(k) plans to Roth IRAs, because they don’t want to write a fat check to Uncle Sam.”

• January 16, 2010.  “Ready to Roth: How You Fund an IRA Conversion Through the ‘Back Door’” – Wall St. Journal:  “Individual retirement accounts funded with 401(k) assets count among your traditional IRA assets during a Roth IRA conversion.  The language is confusing, since many custodians refer to such accounts as rollover IRAs.  But they are technically traditional IRAs. Any IRA labeled as a SEP, SIMPLE or contributory is included, as well. . . . Here is where the ‘back-door’ method comes into play:”

• December 10, 2010.  “Beware the Roth IRA Conversion Trap” – The Wandering Tax Pro:  “For several years now tax professionals, myself included, and personal finance and tax bloggers, again myself included, and financial writers have been talking about 2010 being the year to convert to a ROTH IRA. . . . What we all have forgotten to remind you when discussing this issue is the way one calculates the taxable portion of a ROTH conversion.”

• November 23, 2009.  “2010 Roth Conversion: Factors to Consider Before Making a Decision” – FreeMoneyFinance:  “For more than a decade, Roth IRAs have been offering investors a number of benefits generally including tax free growth in earnings, tax free withdrawals assuming you begin your withdrawals after the age of 59 1/2 and have held the Roth account for the minimum five-year holding period, and no required minimum distributions as is the case with traditional IRAs.  Through the end of 2009, conversion to a Roth IRA from other retirement accounts including a traditional IRA or 401(k) plan is limited to people with a modified adjusted gross income of $100,000 or less.  But as of January 1, 2010, all investors will be eligible to convert funds from a traditional IRA or 401(k) to a Roth IRA, regardless of income level.  While this change will present some attractive options for certain investors, people should weigh the costs and the benefits unique to their own specific financial plans and tax situation before deciding if a Roth IRA conversion is right for them.”

• November 8, 2009.  “Roth IRA Conversion has Perks” – Arizona Republic:  “By now, word has gotten out that 2010 will be a big year for converting traditional individual retirement accounts into Roth IRAs.  That’s when tough eligibility rules, which have prevented higher-income people from making the switch, will be repealed.  Plus, traditional-to-Roth conversions done in 2010 come with a special sweetener: Normally, you must pay any taxes due in the year you make the switch, but in 2010 only, investors can elect to defer the tax bite and spread it over the following two years, 2011 and 2012.”

• September 22, 2009.  “To Roth or Not to Roth: Analyzing the Conversion Opportunity for 2010 and Beyond” – University of Illinois Professor of Law Richard L. Kaplan wrote a popular article on whether to convert a traditional IRA to a Roth IRA (click on the download link then click on the link to one of the download sites).

“Beginning in 2010, all taxpayers will be able to convert their existing Individual Retirement Accounts (IRA) to Roth IRAs, without regard to their level of income or marital status. In effect, taxpayers will be able to lock in current income tax rates on account values that have been eroded by recent investment market declines. This article analyzes who should take advantage of this opportunity, using the barest minimum of arithmetic (and no calculus).”

• September 6, 2009.  “Is a Roth conversion right for you?” – Arizona Republic business reporter Russ Wiles says in his article:

“Roth individual retirement accounts have emerged as a popular tax-sheltered way to invest, and they’ll only get better next year.  Starting in January, Congress will drop the eligibility barriers so that any investor, regardless of income, will be able to transfer money from traditional, deductible IRAs to a Roth.”