Since the Roth IRA was established in 1997, individuals and couples with more than $100,000 of modified adjusted gross income have been out of luck. Because they couldn’t squeeze under that ceiling for converting a traditional IRA to a Roth IRA, they’ve been deprived of the Roth’s tax-free income, protection from required minimum distributions, and hefty estate tax benefits. But the Tax Increase Prevention and Reconciliation Act of 2005 eliminated the income restriction beginning this year, and now millions of affluent households—holding about half of all IRA assets—are eligible.

The media storm has been under way for months, with stories and ad campaigns all talking about converting. But the factors affecting whether you should seize this opportunity aren’t as simplistic as they’re generally portrayed. Converting hinges on three key variables: your tax savings on avoiding required distributions on your traditional IRAs, which kick in at age 70½; your tax rate in the years ahead; and the amount of cash you have outside your IRAs to pay income tax on a conversion.

The benefits of a Roth IRA conversion can be significant—the Roth truly is a unique vehicle in American tax law. But in many instances, a partial conversion may be best. We have the tools and expertise to calculate the trade-offs in your situation, and we’re here to help you.


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