Considering a Roth conversion?

Could converting to a Roth help you minimize taxes and maximize retirement savings?

Roth Conversion

We believe that most investors should consider having a Roth IRA as part of their overall retirement plan because they offer tax-free growth potential and withdrawals,1 which has the potential to help minimize taxes and maximize retirement savings. But Roth IRAs have income restrictions, so not everyone has access to one today.

There's good news. If you've been shut out of a Roth IRA because your income is too high, you now may finally be able to have one. On January 1, 2010, the income limits for converting traditional, rollover, SEP, and SIMPLE IRAs, and 401(k) or other workplace savings plans with former employers, to a Roth IRA were removed. Before this change, only people—single or married and filing jointly—with modified adjusted gross incomes of $100,000 and below could convert. (There will still be income limits for contributing to a Roth IRA this year and beyond.)

So does converting some of your savings to a Roth IRA make sense for you? Fidelity has resources to help you decide.

* Additional state tax implications may apply.

Investing involves risk, including risk of loss.

The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation and to more fully understand the regulations surrounding conversions.

1 Converted amounts are not included in your modified adjusted gross income (MAGI) when determining eligibility. If you are married filing jointly or single, prior to 2010 your MAGI cannot exceed $100,000 in the year you convert. If you are married filing separately, you are not eligible to convert unless you have lived apart from your spouse for the entire taxable year.

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