Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.
For those of you that have been thinking of converting your Traditional IRA into a Roth IRA, now might not be a bad time to do so… Since the conversion of previously deductible contributions is a taxable event, doing it when the market is down is a good way of minimizing the tax hit.
There are, of course, some caveats here…
- Be sure that you have enough cash on hand to cover the taxes, as dipping into the IRA to cover the taxes will result in penalties.
- Keep in mind that the additional taxable income from the conversion could push you into a higher income tax bracket.
- Be aware that conversions are currently subject to income limitations. If your modified AGI is over $100k, you can’t do the conversion.
If your income exceeds the allowable limits, all is not lost… The income limits for Roth IRA conversions are scheduled to disappear in 2010, though it’s still important to think twice before converting.
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