New York - You should consider converting your existing regular IRA account to a Roth IRA if you expect that you will be in a higher tax-bracket in retirement. Most individuals will actually be in a lower tax bracket; hence, switching to a Roth IRA does not make sense.
If your income is less than $100,000 you can convert your regular IRA to a Roth IRA beginning in January 1998. One of the major advantages of converting to a Roth IRA is that all you future distributions will be tax-free (provided you are over 59 1/2 when you withdraw your investments).
The biggest disadvantage is that you become immediately liable for the tax due on the existing IRA upon conversion. In other words, if you have $100,000 in your account, you may wind up with an immediate tax bill of $28,000, if you are in the 28% tax bracket . If you are in the 33% tax bracket, you would owe $33,000.
If you convert and owe taxes, you may want to pay the tax with money from other accounts. this allows you to keep the full account in a tax-free Roth IRA.
An independent Fee-Only financial adviser can help you determine the most appropriate IRA strategy.
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