Tax Planning & Retirement: Looking to 2010

One of the best things you can do is look ahead, planning for the future. When considering tax planning and retirement, the year 2010 is something to keep in mind. I recently received this helpful information from James Wagner at Trust Administration Services:

The year 2010 presents a wonderful opportunity for many individuals to convert to investments in traditional IRAs to a Roth IRA. Investors that are interested in taking advantage of growing money tax-free for retirement should check in with their advisor. Resulting from the Tax Increase Prevention and Reconciliation Act of 2005 the $100,000 modified gross adjusted income ceiling in converting a traditional IRA to a Roth goes away in 2010. Investors can spread the tax impact over a 2 year period for 2011 and 2012. But the benefits will not be available forever. Plans that are converted to Roth IRAs for clients in 2011 or 2012, or any time in the future after 2010, will get taxed on everything all in that one year.

I already have a Roth IRA — I never opened a traditional IRA. But this is good information. If you have a traditional IRA that you have been meaning to convert to a Roth, it might be worth waiting until tax year 2010 to reduce the tax hit.

A tax professional or a fee-based financial planner might be able to tell you more.