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Individual retirement account
Income Limits for Roth IRA Conversions to be Eliminated
Income limits that have prevented many people from converting from a traditional IRA to a Roth IRA will be eliminated on January 1, 2010.
With a traditional IRA, contributions and growth of capital are tax free, but distributions are taxed as normal income.
Roth IRAs differ in that contributions are taxable while growth of capital and distributions are tax free. In addition, unlike traditional IRAs, there are no required minimum distributions with Roth IRAs. Last, with a Roth IRA your heirs do not owe income tax on withdrawals.
Obama Administration Proposes Mandatory Automatic IRA Enrollment
The Obama administration's budget proposal includes a provision for mandatory automatic enrollment in individual retirement accounts (IRA) or "auto-IRAs."
The administration's intent with auto-IRAs is to provide a "universal" retirement savings system that is employment-based.
Auto-IRAs would be mandatory for employers who do not offer a retirement savings plan--such as a 401k--to their employees. Administration officials suggest that such a system could impact up to 78 million Americans.
A Roth IRA Conversion Might Make Sense with Tax Increases on the Horizon
Both traditional individual retirement accounts (IRAs) and Roth IRAs are tax advantaged accounts.
With a traditional IRA, contributions to the account are tax deductible. Appropriate distributions from the account are taxed in the future at income tax rates that apply to the account owner's future level of income.
Contributions to a Roth IRA are not tax deductible, but the future distributions are tax free.
