A tax-free pension life is attractive that is why a Roth IRA conversion seems to be a popular choice for many. Formerly a Roth IRA conversion was only possible if your modified adjusted gross income (MAGI) was less than $100,000. But, as of 2010, new tax laws permit anybody to convert from a Standard IRA to a Roth IRA. This effectively means for the very first time, larger income earners may take advantage of this improved tax law. Earnings limitations still remain when it comes to being approved or qualifying for a Roth IRA, therefore the advantage is in doing a Roth IRA conversion.
Important Info You Have to know About
Upon doing a Roth IRA conversion from your Traditional IRA, there's a 2 months window of opportunity. You might withdraw savings from your Traditional IRA and deposit them into you Roth IRA. This is what is referred to as a 'conversion contribution' and all transformation strategies are completed as a roll-over. If this is completed within the time period two months you'll not be issued with a 10% penalty. If you decide to take out a small amount of funds from the standard IRA but not put in them into a Roth IRA account, then that amount of money will become taxed as standard income and incur a 10% fine. The Roth IRA conversion is an option for many other kinds of retirement plans too. For instance, an employer's qualified pension plan or a 401k amongst others can be rolled-over into a Roth IRA. Moreover a profit sharing or stock bonus plan may also be rolled over into a Roth IRA. In summary, starting in 2010, irrespective of your earnings, if you wish to have a tax-free pension, a Roth IRA conversion from your present retirement accounts that are taxable upon distribution may be a wise strategy.
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For more information regarding Roth IRA conversion please view the Roth IRA conversion page.
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