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Jim Lentini: Rule changes to know for retirement in 2010

Posted: March 8, 2010 10:43 p.m.
Updated: March 9, 2010 4:55 a.m.

Required Minimum Distribution (RMD) will resume in 2010. After the unprecedented market volatility that occurred during the second half of 2008, the Worker, Retiree and Employer Act of 2008 was signed into law.

It allowed individuals to suspend their 2009 required minimum distributions from all qualified accounts and further grow (or repair) their account values without penalties. The Act allowed for the suspension of RMDs for 2009 only.

Any owners of a traditional, SEP or SIMPLE IRA who reach age 70 1/2 must begin taking RMDs by April 1 of the following year.

If you have heard of the Roth changes for 2010, you may wish to research and see if it may be beneficial for you to consider converting your IRA to a Roth in 2010.

In 2010, the new eligibility rules for individuals who were previously unable to take advantage of a Roth IRA because their adjusted gross income was over $100,000, can now consider conversion of IRAs to a Roth. In addition, individuals who choose to convert assets to a Roth IRA in 2010 have the opportunity to split the conversion taxes between 2011 and 2012. This applies to IRAs that are converted in 2010 only.

What does this mean to you? In the right situation, a Roth conversion may have benefits for future income, but the decision to convert, or how much to convert, should be done with careful consideration and only after you have discussed the decision with your financial advisor.

You may also want to discuss how to minimize the taxable income from the RMDs of an IRA if you are able to defer the income into a tax advantage strategy.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.


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