Retirement Reform Blog

Several months ago, I wrote about the pros and cons of converting a traditional IRA to a Roth IRA (see Roth 2010:  Should You Convert?).  Beginning this year, any individual can convert to a Roth IRA and take two years to pay the taxes, regardless of household income level (in previous years, only those with household incomes below $100,000 annually could convert to a Roth).  Further research by “yours truly” indicates that a Roth conversion may be ideal for those who can pay the taxes on the converted amount and are still several years away from retirement (see my new NCPA publication, Should You Convert to a Roth IRA?).  After punching some numbers into ESPlanner, a financial planning software developed by NCPA senior fellow and Boston University economist Larry Kotlikoff, I found that the typical 40-year old couple can increase their living standard by as much as 15 percent at retirement by converting to a Roth now and continuing annual contributions to a Roth.  And who doesn’t want to have a fairly comfortable standard of living at retirement? Read the rest of this entry »

Do you want to pay the piper now, or later?  Currently, only households making less than $100,000 a year or spouses filing jointly can convert their traditional Individual Retirement Account (IRA) into a Roth IRA.  But as noted in a recent Wall Street Journal article those restrictions will be lifted in 2010, so that workers of any income level can convert their traditional accounts to a Roth.  Traditional IRAs allow workers to save money tax free now and pay taxes when they withdraw their money during retirement.  Roth IRAs, on the other hand, allow workers to pay taxes on retirement savings now and withdraw it tax free later.   If you're not sure whether a Roth IRA is right for you, check out the NCPA publications "To Roth or Not" and "Would You Benefit from a Roth IRA?"