IRA Conversions
If you’re a high-income earner and haven’t been able to contribute to a Roth IRA to date, you’ll soon get your chance. Beginning next year, investors of all income levels will be able to convert a traditional IRA to a Roth, thereby ensuring tax-free withdrawals and no required minimum distributions in retirement. Individuals who earn too much to make a Roth contribution should consider making a nondeductible IRA contribution in 2009; they can then convert those assets to Roth status in 2010. Income limits on new IRA contributions will remain in place, but it will still be possible for those high-income earners to take a backdoor way into additional Roth contributions by continuing to make nondeductible IRA contributions and then converting shortly thereafter. It’s possible that Congress may close this loophole down the line, given that it doesn’t make sense to leave the income limits in place for initial contributions but not conversions. But for now it looks like an opportunity.