The two new things IRA rules brought us are:



- Income limit for Roth IRA conversion repealed: Clients often ask whether they should choose a traditional IRA retirement plan or a Roth IRA. Contributions to a traditional IRA are tax deductible while contributions to a Roth IRA are not. Traditional IRA's grow tax deferred (any money you take out is taxed as income) and you must start withdrawing money by April 1 of the year after the time of the year when you turn exactly 70 years and 6 months.

Roth IRAs grow tax free and money doesn't have to be taken out during your lifetime. You are allowed to convert a traditional IRA to a Roth IRA (and pay taxes today on the amount you convert), and for many people this makes a lot of financial sense.

That's right, by the year 2010 all taxpayers regardless of income will be able to switch to Roth IRA. Furthermore, the tax due on conversions done in 2010 can be spread out over two years and paid out in 2011 and 2012.

Obviously, our American Congress realizes that Roth IRAs are a good thing and they want to make it as enticing as they can for you to do a conversion. Since this rule opens up the possibility of a Roth conversion to everyone, you should mark on your calendar to have a discussion with your advisors on January 1, 2010 in case you consider Roth conversion a good option for you.

- Company Sponsored Retirement Plans Can Now Be Rolled into Inherited IRAs by Non-Spouse Beneficiaries: The Stretch IRA is a very powerful concept. Properly structured, your non-spouse beneficiary (your spouse can always just rollover your IRA into their own and treat it as theirs) can take small distributions each year, and pay taxes on them, and leave the balance or your IRA distribution rules growing tax deferred for their lifetime.

Effectively, from next year, a non-wife beneficiary (all your descendants) can roll over a company sponsored retirement plan into a properly titled inherited IRA rules. The new rules will now allow non-spouse beneficiaries the ability to stretch distributions, and taxes, out over the rest of his/her life.

The new rules also allow company sponsored plans to be transferred into trusts that can stretch out distributions. In the case where you do not trust your beneficiaries to make smart choices with the money, a trust can be used.

There are a couple of key details with the new IRA rules; The company has to allow the transfer, which it may not, and it must be a direct transfer to the inherited simple IRA rules. The Congress seems to understand the important roll IRAs play in retirement savings, and so far this year they have been very accommodating on making the rules easier and more attractive. This area of the law is constantly changing so stay alert, very alert!