The rush to convert: Why 2010 will be the year of the Roth IRA

Updated

Think of 2010 as the year of the Roth IRA. Beginning January 1, the rules governing who can invest in a Roth will be modified, allowing anyone with an existing traditional IRA to take advantage of a Roth -- and the special post-retirement tax breaks that this investment vehicle offers.

The more lenient rules are a result of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), which was signed into law by President Bush in May, 2006. Under the new rules, the income limits for converting a traditional IRA to a Roth IRA will no longer apply. So anyone with an existing IRA can take advantage of the Roth. Establishing and making contributions to new Roth IRAs will not change, however. For those who think that they will be paying a much heftier tax rate come retirement than they do now, this is good news. But they will have to act fast: The new rules are only in effect for one year.

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