New Opportunity for 2010: Convert Your IRA

The year 2010 offers a great opportunity if you have an IRA. IRAs can now be turned into Roth IRAs regardless of your income—prior to this year, you could only do this if your adjusted gross income was $100,000 or less.

Any amount you withdraw from an IRA is typically taxable income to you, so being able to have a Roth IRA that you can access tax-free is a great advantage to you. A Roth IRA allows you to take funds from the plan income tax–free if you meet certain conditions, and you never have to take mandatory withdrawals during your lifetime.

When converting, you’ll have to pay income tax on the IRA amount you convert, but you can pay half the taxes in 2011 and half in 2012. If your IRA is currently worth less than what it used to be, perhaps due to a market decline, it may be an opportune time to convert to a Roth. If it is worth less when you convert it, you’ll pay tax on a smaller amount. Take this opportunity to expand your philanthropic desires by making a tax-deductible gift to Lewis & Clark to help offset the taxes generated by the Roth conversion. Contact Sharon Bosserman-Benson for the Undergraduate or the Graduate School at 503-768-7911, 800-753-9292, or plangivg@lclark.edu, or the Law School development office at 503-768-6901 or lawgive@lclark.edu for more information on ways to offset your taxes.
Before doing a Roth IRA conversion, see your tax advisor for more information.