Suze Orman
Roth IRA Rollover in 2010 Information Video
(May 21st, 2010)
Suze Orman: I just want to take
a moment to go beyond the basics here with that last caller because
this is something I think it is very important for all of you to
take advantage of. Prior to next year, you can only convert money
from a traditional IRA or any type of retirement account in to a
Roth IRA if your income is $100,000 a year or less; that's your
single income or joint income if you are married.
Starting in the year 2010 regardless of your
income, you will be able to convert in to a Roth IRA with the retirement
money you may have somewhere. There are all different types of retirement
accounts you can have besides your 401k and 403b, you can have an
Individual Retirement Account (IRA) or a traditional one where you
can put money in before tax.
You can also have a Roth IRA but you must meet
some income qualifications to qualify for a regular Roth IRA. You
can also have what's called a non-deductible IRA.
A non-deductible IRA works when you put money
in to a non-deductible IRA but do not deduct it from your taxes;
the growth on that money however; you will pay taxes on. This is
different from a Roth IRA where you put it in with after-tax money
but you don't pay income tax on the growth.
So in a non-deductible IRA, you could put money
up to the maximum every single year and starting in the year 2010,
you can start to convert it in to a Roth IRA and you can do that
every single year. Now it is true you will NOT pay taxes when you
convert it on your original contribution but if that money happens
to have growth on it, you will pay taxes. Say you put in originally
$5,000 and now it has grown to $7,000, you will pay income taxes
on the $2,000 growth. If you do this every single year, you will
have a lot of money in a Roth IRA and then once it is in a converted
Roth IRA, it will grow tax-free.
Summary of Roth IRA Conversion
- Year 2010: No Income Limitations
- Can Convert in to a Roth IRA with retirement money
- Traditional IRA: Pre-tax money
- Roth IRA Conversion: After-tax income qualifications
- Non-Deductible IRA: You don't deduct from taxes; You will pay
taxes on growth.
