Eligibility for Roth IRA Conversions Extended to All Investors

Law to be enacted in 2010 eliminates income limits

Starting in 2010, a new law eliminates the current rule that only those with an adjusted gross income (AGI) below $100,000 are eligible to convert a Traditional IRA into a Roth IRA. Also, the new rule enables investors who convert in 2010 (and 2010 only) to spread the tax due upon conversion over the next two years, instead of just one year.

Get a Jump on 2010

If you believe you might benefit from a Roth IRA conversion, speak with your tax advisor to find out what strategies might work best for you. It's important to get the planning process started now, so here are some pointers:

Review your IRA planning strategy to see if you are maximizing your contributions. Depending on your financial situation and goals, over the next two years it may make sense to contribute as much as you can to Traditional IRAs. In 2010, you can convert these funds to a Roth IRA, and then be able to pay the taxes on the conversion in 2011 and 2012. For the 2008 tax year, you can contribute up to $5,000 to an IRA, or a maximum of $6,000 if you're age 50 or older.
If you are contributing the maximum to a Traditional IRA, see if you can increase the amount you contribute to your employer-sponsored retirement plan. As with your Traditional IRA funds, you can also roll over the money in these plans to a Roth IRA in 2010. The 2008 contribution limit for employer-sponsored retirement plans like 403(b), 401(k) and 457(b) plans is $15,500, plus an extra $5,000 if you're age 50 or older.
If you were planning on doing a conversion over the next few years anyway, think about waiting until 2010. You can then spread the taxes you'll owe on the conversion over 2011 and 2012.

Some Words of Caution

There's always the possibility the new law could be amended before 2010 actually arrives. For example, Congress could decide to raise tax rates, which would increase the cost of doing a conversion. Alternatively, Congress could decide to repeal the law before it takes effect in 2010. Talk about all these considerations with your tax advisor to determine if it still makes sense to do a conversion.

Next Steps

Find out more about the advantages of Roth IRAs to determine if they are right for you. If you are ready to start investing in a Roth IRA, contact your investment advisor to begin the process.

The tax information in this article is not intended to be used, and cannot be used, to avoid possible tax penalties. It was written to promote the products and services the article describes. Neither TIAA-CREF nor its affiliates offer tax advice. Taxpayers should consult an independent tax advisor for advice based on their own particular circumstances.

Investing in securities involves inherent risks. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so your accumulation, when redeemed, may be worth more or less than the original cost.

†	Web seminars are best viewed using a high speed Internet connection (such as DSL, ISDN, or cable access). Macromedia Flash Player 6.0.79 or higher, or Macromedia Flash Player 7 or higher for Linux and Solaris is required.