Ask Money

Converting to a Roth after 2010

Chris Farrell Jun 7, 2010

Question: Hi! I’ve been hearing a lot of talk recently about the income limits going away in 2010 for converting a traditional IRA to a Roth IRA. I’m interested in a conversion for tax diversification purposes (my Roth IRA is quite small compared to my 401(k)) but I don’t want to do a conversion in 2010. What are the income limits (if any) for conversions done in 2011 onwards? Will I still be able to do a conversion then? Thanks! Laura, Santa Clara, CA

Answer: The $100,000 earnings limit on converting a traditional IRA into a Roth is permanently lifted (unless Congress changes its mind).

It’s gone. You can convert later on if it makes financial sense for you. However, the option to spread out the tax bill owed on conversion over two years is a one-time tax perk for 2010.

There is a lot to consider when it comes to conversion. I’ve written a number of posts on the pros and cons of converting a traditional IRA into a Roth. A number of them are gathered here. I also like the Roth conversion calculator at Analyzenow.com. .

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.