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Roth IRA Conversion

A look at the world of Roth IRA limits and more investment details about these retirement plans.

Retirement planning is a difficult business.  Knowing which type of retirement account you need to have is never easy, and neither is understanding the differences between all of your available options.  For that reason, you want to find an account that’s guaranteed to help you make money, so that you don’t have to worry about how you’re going to pay for your retirement.  If you fear you’ve made the wrong choice with a standard IRA, you always have the option for a Roth IRA conversion, so that you can try something new.  This way, you’re able to benefit from a different account, without losing the money that you’ve already saved.  With a Roth IRA conversion, you can ensure that you’re able to try a new retirement plan, without having to start all over again.

The way that Roth IRA conversion works, is by taking an IRA that you had previously, and rolling it over into a Roth account.  This way, you can take all of the money invested in the IRA, and ensure that you’re still able to use it without all the tax penalties that can be imposed, in the new account format.  Plus, as of 2010, this is free to do no matter the amount of income that you make.  Prior to 2010 you would have had to pay penalties if you wanted a Roth IRA conversion and you made more than $100,000 a year.

The benefits of Roth IRA conversion, is that it allows you to take advantage of the different type of account, so that you’re able to maybe save even more money.  Any type of retirement account is a gamble, but you may find that you like the idea of this type over your current IRA.  Typically a standard IRA is great, because it can give you 4 to 5% of the money that you put in each year, right back to you to add to the sum.  However, a Roth IRA is sometimes the better choice, simply because it allows you to make investments completely tax free, so that you have the potential to make even more money.

Of course, it’s important to realize the negative parts of Roth IRA conversion.  The biggest negative being that you’re going to have to pay a lot more in taxes for the privilege of converting your accounts.  This is because you have to use the conversion as part of your income, so that it looks as though you made a lot more money that year, which forces you to sacrifice some of your retirement on taxes, to take a risk with the Roth IRA.  You have the potential of making a better retirement for yourself, but also, you have the potential of wiping out your previous IRA.

Your best friend in any Roth IRA conversion is always going to be your investment firm.  You always want to choose a reputable one, so that you can be as assured of success as anyone.  This way, you can have a firm that you trust, so that you can be sure that your account can provide you with the tools you need to succeed.