Thursday, August 21, 2014

Roth IRA Limits Removed for 2010

January 20, 2010 by  
Filed under money, taxes

blackgirlgrown is proud to feature Shannon King Nash, author of the award-winning book entitled, “For the Love of Money: The 411 to Taking Control of Your Taxes and Building Your Net Worth.”

Roth IRAs have long been a great retirement choice.  You can contribute up to $5,000 each year ($6,000 for those 50 and older).  You don’t get a tax deduction, like with a Traditional IRA, but the money you put in a Roth IRA is not taxed and when you take it out at retirement age, you’re not taxed on that either! 

Have you ever wanted to start a Roth IRA, but always made too much money?  Those who earn more than $100,000 as a single person or more than $159,000 as a married couple typically can’t do a Roth IRA (i.e., your’e deemed a high-income earner).   Well 2010 is your lucky year.   The usual income limits for high income earners are being temporarily suspended for Roth IRAs if you convert your Traditional IRA into a Roth. 

The catch?  You have to pay an upfront tax to convert the Traditional IRA into a Roth IRA. 

But for many high-income earners the catch is financially worth it.  You may consider rushing to open a Traditional IRA during this final month of 2009.   When January comes around, you can convert it into a Roth IRA and pay the taxes on this conversion, which should be small because you only had the Traditional IRA for a few weeks.  That’s it.  You will never pay taxes again on the money in that Roth IRA! 

You can also consider converting Traditional IRAs that you have had for years into Roth IRAs, but please work with your tax advisor and financial professional to figure out your upfront tax hit and to maximize the benefit for your personal situation. 

Keep in mind, tax rates are likely to go increase over the years, so its better to pay an upfront tax now than years later.   Again, please discuss this with your tax/financial advisor. 

Shannon King Nash is an Attorney, CPA, Author and Entrepreneur. She is the author of the award-winning book entitled, “For the Love of Money: The 411 to Taking Control of Your Taxes and Building Your Net Worth.” She uses song lyrics and entertaining stories ripped from the headlines to teach readers how to manage their finances and taxes. She’s been featured as a tax, finance and legal expert in Global Finance Magazine, Jet Magazine, Essence Magazine, Ebony Magazine, ABC News Online, Upscale Magazine, The Chronicle of Philanthropy, Bankrate.com, L.A.Parent Magazine and The Washington Times. Currently she can be seen on the cover of the April 2009 issue of Black Enterprise Magazine. In addition, she served as the finance expert on recent episodes of BET’s “The Center” and Style Network’s “Modern Girls Guide.” Shannon is a graduate of the University of Virginia School of Law.  Follow Shannon’s articles of Ehow and the LA Nonprofit Examiner.
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  • KC

    If you have a traditional IRA and convert it in 2010, you don't have to pay all the taxes up front. You can spread the taxes out over 2011 and 2012.