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Non-Deductible IRA Contributions

Posted by: DANIEL K. CARTER

Posted on: December 31, 2009

A Year-End Strategy to Help You Make the Most of Your 2010 Roth Conversion Opportunity

Roth conversion is one of the biggest topics in personal finance right now. Currently, single and married filers whose Adjusted Gross Income exceeds $100,000 are ineligible to convert traditional IRA and retirement plan assets to a Roth IRA (married individuals who file separately may not convert regardless of AGI). But effective January 1, 2010, these income limits are lifted, and as a result, more than $1.4 trillion of retirement plan assets will be newly eligible for Roth conversion.

If you would like to leverage this significant tax planning opportunity, you can make 2009 and 2010 contributions to a non-deductible IRA by early January, then convert these non-deductible IRA assets to a Roth IRA as soon as the following day. As long as you have earned income of at least the amount of the contribution in the year for which the contribution is made, you may contribute $5,000 for 2009 and another $5,000 for 2010. If you turn 50 in the tax year for which the IRA contribution is made, you may make a $1,000 "catch up" contribution as well for a total contribution of $6,000.

Your Trust Officer is here to answer your questions and help you evaluate the value that a Roth IRA conversion may provide considering your goals and personal circumstances. We look forward to hearing from you!