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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: Bruce A. Bowman who wrote (4411)4/6/1998 12:31:00 AM
From: steve in socal  Read Replies (1) of 18928
 
hey bruce---got my monthly newsletter from schwab a couple of days ago and finally got around to reading it this evening. a whole page devoted to roth ira vs. conventional and the possability of switching and the ramifications.
the highlights on converting (we're only talking ira's here) "Converting can potentially mean thousands of extra dollars at retirement but if your agi is over $100k, the conversion option is not available.
If you are able to convert, you have to pay ordinary income taxes on all earnings and pre tax (deductible) contributions. And, if you pay these taxes with money from within your ira, that ammount will be subject to an early withdrawal penalty if you are under 59 1/2. If you convert in '98, your tax liability will be spread over 4 years, so you don't have to come up with all the money at once.
if you do qualify, and have sufficient assets outside your ira's to pay the taxes, your future tax rate expectations will again determine if conversion may be advantageous.
it also may be prudent to wait till year end to make your decision. if you convert earlt in the year only to have your agi rise above $100k by years end, you could face substantial penalties."

needless to say, consulting with your tax professional is the onl;y way to go. hope this helps.
good luck. s.k.
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