Power is a good thing, especially when it comes to earning. That’s the strength of a Roth IRA. It gives you a powerful way to invest for retirement. Unlike a traditional IRA, contributions are made from after-tax earned income, and your account earnings build tax-free.

New Roth IRA Conversion Opportunities

· The $100,000 income limit for Roth conversions has been permanently repealed beginning January 1, 2010.
· Income from 2010 conversions can be reported on your tax return for 2010 or you may divide it equally between your 2011 and 2012 tax returns.
· Conversions are permitted for taxpayers who are married, but who file separately.

Why You May Want to Consider a Roth IRA Conversion

Although you will pay taxes on pre-tax assets that you convert to a Roth IRA your money will then grow tax free. Future withdrawals from a Roth IRA are tax-free if they are a "qualified distribution" under IRS rules.

Due to a depressed market you may be experiencing low market values in your IRA, so this may be an especially advantageous time to convert as you will pay less taxes, and future growth will be tax free (as long as qualifications are met).

Decided Conversion Wasn't The Best Choice For You?

Regardless of the reason, you have until the 15th of October of the year following the year in which you converted to a Roth IRA to recharacterize back to a traditional IRA. Keep in mind, should you recharacterize your Roth Conversion you will not be allowed a reconversion until the following year. You will also no longer be allowed to spread the income tax from the conversion over two years.

Contribution Limits & Modified Adjusted Gross Income Phase Out Ranges 

The amount that can be contributed annually to all IRAs, (including Roth IRAs, but excluding Education IRAs) can not exceed the annual allowable limit.

Contributions to a Roth IRA can continue to be made after age 70 1/2.

Should you not be eligible to make contributions to a Roth IRA, you may wish to contribute to a non-deductible traditional IRA and then convert to a Roth IRA in subsequent years.

A Roth IRA offers you flexibility. With it, you can choose to invest tax free for as long as you wish and choose to withdraw money or not. You can withdraw your earnings tax-free and penalty-free after five years and after you reach age 59-1/2. Penalty-free withdrawals are allowed for first-home purchase‚ higher education‚ death‚ disability and certain medical and health insurance bills. In most cases, Roth IRAs can be passed along to heirs, letting your loved ones benefit from the tax-free investment growth and distribution of assets, and unlike a traditional IRA, there are no requirements for mandatory withdrawal once you reach age 70-1/2.

Traditional IRAs may be converted to Roth IRAs, and with the expanded “portability” rules under EGTRRA, qualifying “distributable” events, such as retirement, separation of service, death or disability permits rollovers between other retirement accounts, such as; 401(k), 403(b), 457 and a traditional IRA, thus allowing greater flexibility in establishing a Roth IRA program.

A Roth IRA may not be converted or rolled over to other retirement fund investments. Our knowledgeable Financial Services Representatives can help you evaluate any traditional IRAs you have to decide if conversion to a Roth IRA is right for you.

An otherwise eligible distribution won't be qualified if made within the 5-tax-year period beginning with the first tax year for which a contribution was made to the individual's Roth IRA.

For pay outs properly allocable to rollovers from a non-Roth IRA, the 5-year period begins with the tax year in which the rollover contribution was made.

Roth-IRA pay outs that aren't qualified distributions will be taxed and the taxable portion of pre-age-59-1/2 withdrawals will be penalized, subject to the 10% penalty exceptions applicable to premature distributions from non-Roth IRAs.

If a non-qualifying pay out is made, contributions to the Roth-IRA will be recovered tax-free before earnings are taxed.