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Start Maximizing Your IRA Contributions Now! By William C. Miller, William C. Miller & Associates
The Tax Increase Prevention and Reconciliation Act, signed into law on May 17, allows people to convert their traditional IRA balances to Roth IRAs beginning in 2010 by removing the income and filing restrictions. While many doctors covered by a qualified retirement plan are ineligible for deductible IRA contributions, they may still make nondeductible IRA contributions. And paying the tax now means that less tax is paid at the time of conversion. Just how much can you accumulate between now and 2010? If you are married and age 50 or over, each spouse can each contribute $5,000 to a nondeductible IRA for years 2006 and 2007, then $6,000 thereafter. After 5 years of contributions and a 7 percent growth assumption, you and your spouse would accumulate roughly $64,800. If you convert to Roth IRAs in 2010, only the dividends and interest or $8,800 will be includible as ordinary income. In addition, you may even spread the tax liability over years 2011 and 2012 so that no tax is due in the year of conversion! Then, under The Pension Protection Act of 2006, company plan funds can be converted to Roth IRAs – beginning in 2008 – without first having to roll those funds over to an IRA and convert to a Roth IRA from there. The deadline for making your 2006 IRA contribution is April 17! Please call if I can answer any questions or be of assistance. William C. Miller is the principal of William C. Miller & Associates, an independent financial planning firm in Delray Beach. Miller is a Certified Financial Planner, Chartered Life Underwriter and a Chartered Financial Consultant. He can be reached at (561) 276-8710 and by email at Bill@wcmlifeplan.com. His web site is http://www.wcmlifeplan.com. |
Start maximizing your IRA contributions now. Why? Two separate tax laws signed last year may soon permit you to convert your traditional individual retirement accounts and qualified plan balances to Roth IRAs.