Time to Convert?

Physician's Money Digest, August31 2004, Volume 11, Issue 16

Important:

Despite the advantages of a RothIRA, the barriers to converting a traditionalIRA into a Roth keep many physiciansfrom making the move. The majorhurdle is that any funds you convert aretaxable. Another is that taxpayers with amodified adjusted gross income (MAGI)of more than $100,000 aren't allowed tomake the conversion. To figure out yourMAGI, see IRS Publication 590, availableat www.irs.gov. But if your income goesbelow the threshold, even temporarily,you can make the conversion. This maybe a good move, since eventual withdrawalsfrom the Roth are tax-free. Before making a conversion,see if your state government protectsRoth funds from creditors, such as successfulmalpractice litigants. Althoughalmost all states have laws that put all orpart of the assets in traditional IRAs off-limitin bankruptcy cases, many do nothave the same rules covering Roths.