Summary
Conversion takes place when one is not interested in the Traditional IRA and wants to change to the Roth IRA. The changing from one investment plan to the Roth IRA is called the Roth IRA conversion. However, there are many rules and limitations that are recognized by the IRS to have a conversion from the Traditional to Roth IRA.
Roth IRA conversion rules 2011
In 2010, the income limits for Roth IRA conversions have disappeared, in the sense that they no longer exist. Many account holders, who were forced have a Traditional IRA due to their higher income could not convert to the Roth IRA. But, it is now possible, as in 2011 one can convert from a traditional IRA to a Roth IRA. Moreover, you are still able to rollover a 401K to a Roth IRA without going through the process of rolling the 401K into the traditional and then converting to a Roth IRA.
However, it is essential to know the main difference, as you cannot spread out the tax payments that are associated with the Roth IRA conversion. It would be a good idea to consider the tax implications and the impact it has on your move.
Three rules of conversion
1. Rollovers – The IRA rollover is actually an eligible distribution from the Traditional, which is rolled – over in the Roth IRA within 60 days after distribution.
2. Same Trustee Transfers – If the trustee for your traditional is the same one as the Roth IRA, then that trustee can make the transfer of your account on your behalf.
3. Trustee to trustee transfers – In many circumstances, the traditional trustee will make a transfer to the new Roth trustee on your behalf.
Conversion Income limits
In January 2010, the Congress demolished the $100,000 adjustable gross income limit on conversion, which is great news, as now anyone can convert to a Roth IRA, no matter what his income is. In order to convert the funds the year 2011 will effectively remove the limits of income and the ones in the higher income brackets will have to be a bit creative while investing.
The amounts that you can contribute according to the rules are: if you are under 50 years of age it will be $ 5,000 and if you are above 50 years of age it will be $ 6,000.
However, the amounts fluctuate according to personal level of AGI and if the income surpasses the IRS limit, then your contribution amount phases out. The 2011 Roth IRA conversion rules also suggest that the person who wants to convert to Roth IRA is welcome, but the high income earners if they want to make new contributions.
Conclusion
The conversion rules for 2011 mark the continuation of a significant change in the total retirement plan. Now the income limit of $ 100,000 does not exist and high income earners do not have to look outside Roth IRA. Individuals interested in Roth will be fully benefited and advantages of Roth IRA are applied to everyone.
So now you can take the advantage of the new change of 2011 conversion rules and get yourself a Roth IRA account.