Conversions To A Roth Ira

By Author: Annuity Zing
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The fund that you roll over from a traditional IRA into a Roth IRA are taxable in the year of the rollover. For example, if you rollover $50,000 in 2009. Even though a conversion to a Roth IRA causes you to pay current taxes on the amount rolled over, the amount will then grow tax-free in the Roth IRA.

Roth IRA rollovers work best if you have funds outside the IRA to use to pay taxes on the rollover. For example, a rollover of $50,000 into a Roth IRA may result in $10,000 in income taxes. It's best to rollover the entire $50,000 and pay the taxes with $10,000 that you have outside your IRA. If you need to take $10,000 from your traditional IRA to pay the taxes, you wind up with only $40,000 left to rollover into the roth IRA.

A traditional IRA can be converted to a Roth IRA in one of three ways:

Rollover: Assets from a traditional IRA can be contributed (rolled over) to a Roth IRA within 60 days after their distribution.

Trustee-to-trustee transfer: The financial institution holding the traditional IRA assets transfers those assets to a Roth IRA. In this case, the transfer should be simpler because ...
... it occurs within the same financial institution.

Here are a few upcoming changes for conversions:

Effective after December 31, 2007, direct rollovers from the tax-qualified retirement plans to Roth IRAs will be permitted. These rollovers are subject to the same rules that apply to conversions from a traditional IRA to a Roth IRA.

Effective for tax years beginning after December 31, 2009, the requirement that a taxpayer's gross income no exceed $100,000 to be eligible to convert a non-Roth IRA to a Roth IRA will be eliminated.

A special rule has been established for rollovers to Roth IRAs in 2010. Amounts rolled over into a Roth IRA in 2010 aren't included in your income in 2010; instead, 50 percent of the amount is included in your income in 2011 and 50 percent in 2012. That's quite a deal for the year 2010 because none of the rollover will be included in your income. This deal is something you should seriously consider.

Annuity zing also providing the information on IRA Direct Rollover and how to convert Rollover IRA to Roth IRA for your retirement planning.
http://www.ira-direct-rollover.com/
http://www.rollover-ira-rothira.com/