Saturday, June 20, 2009

Potentially Good News on Roth IRAs

An article in the Wall Street Journal caught my eye tonight, as I still have my 401ks and IRA on my mind. The article claims that there will be new rules for Roth IRAs and that the income limit, which I currently exceed, will be lifted. Apparently the rules about income for converting (but not funding) will demolish the income limit. The catch? There are taxes involved. This is all new to me because once I saw the income limits I stopped investigating Roth IRAs. When (if) I convert my 401k to a Roth IRA, I will have to pay income tax on the contributions and the earnings.

So how would this influence my decision to transfer my old 401K? The article answers just that question:
“If you’re thinking about doing a Roth conversion, leave your 401(k) alone” rather than rolling it into an IRA beforehand to keep your share of nondeductible contributions higher in the calculation above, says John Carl, president of the Retirement Learning Center LLC in New York

Another factor to consider when I try to decide what to do with the old 401K. Does anyone else spend this much time strategizing around where to keep assets? I don't even have a lot of assets, relatively speaking.

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