Don't Let Your IRA Accounts Languish
The week leading up to your retirement is busy with farewells, an office party and hurried completion of numerous major projects. But you look forward to finally being able to settle back, catch your breath and enjoy a life of leisure.
Only one complication may slow you down:
You're 90 years old.
That might be an exaggeration, but a growing number of Americans do expect to work well beyond traditional retirement age. One-third of working Americans say they'll have to work beyond age 65, according to a recent poll by the Gallup organization.
Individual retirement accounts can play a major role in determining when you retire and how comfortable you'll be.
This is an opportune time to take stock of your IRAs in the context of overall investment planning and to review changes for the 2010 tax year that make conversions from traditional tax-deferred IRAs to taxable Roth IRAs attractive to a greater number of taxpayers.
First look at the big retirement picture, say the experts.
"I like a holistic, big-picture approach in which clients look at not only their
Some of Fingerman's clients put all their
"We segment the
Many investors have their IRAs scattered among a number of financial firms. Consider consolidation for a number of reasons.
"I find many clients have multiple IRAs and possibly old 401(k) accounts that are dormant," said Fingerman, pointing out that many custodian firms charge an annual
From a record-keeping standpoint, combining dormant accounts can make sense, he said.
"As you get nearer to retirement, in order to make the accounting easier it may be useful to consolidate accounts," added Picker. "When you are still making contributions, however, it is sometimes better to have different accounts for your different investment strategies."
A boom in
"There's been quite a pick-up in Roth IRA conversions, with changes in rules giving us a chance to be more proactive with resources and with guidance about retirement savings," said
Starting with the 2010 tax year, the opportunity to convert a traditional tax-deferred
You can either report all of the taxes on your 2010 return or take advantage of a one-time opportunity to also spread the payment out over the 2011 and 2012 tax years, as well.
Be sure that you are fully aware of the taxes you will owe, since the amount in your traditional
"We think most people are candidates for a Roth IRA conversion in some way, shape or form," believes Picker. "For example, realize that it isn't only an option for 2010 but rather is available going forward, and that there is no requirement that you must convert your entire (traditional)
Roth IRAs are different from traditional IRAs in that you don't get a tax deduction for making a contribution to a Roth IRA, but those contributions grow without taxes and you don't have to pay any tax upon withdrawal in retirement. In addition, Roth IRAs aren't subject to the traditional
In terms of making new contributions, both types of IRAs have a 2010 contribution limit of
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Personal Finance - Don't Let Your IRA Accounts Languish
(c) 2010 Andrew Leckey