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Switch to a Roth IRA, Sidestep Taxes

Owners of traditional IRAs can convert to Roth IRAs in 2010, without regard to income limits. Why are Roth IRAs attractive?

• All qualified distributions are tax free, compared with withdrawals from traditional IRAs, which are taxed at ordinary income rates.
• There are no required minimum distributions after age 70½.
• Taxpayers who are still working can continue making contributions to Roth IRAs after age 70½.
• At the owner’s death, the assets in the Roth IRA are not subject to income tax.

Before converting, remember that a conversion generates income tax. Special tax rules allow taxpayers making a switch in 2010 to pay half the tax in 2011 and half in 2012. However, if the IRA owner is concerned that income tax rates will be higher in the coming years, it may be better to recognize the income and pay the tax in 2010. It’s possible to offset the additional tax by generating additional income tax deductions – and one of the easiest ways to do that is by making charitable contributions. Call Jane Wrisley at (610) 402-9159 to learn how to secure a charitable deduction while retaining income for life from your gift.