The wraps are finally off. Now you can convert a traditional IRA into a Roth IRA, regardless of your income. Until this year, you couldn’t make a conversion during years in which your modified adjusted gross income exceeded $100,000.
But should you convert? It could be a tough call, based on variables too numerous to mention here. And though the change in the law has led many investors to use online conversion calculators to help them with the decision, most of these omit several key factors that could be crucial. Some online calculators are misleading, while others are hopelessly outdated or flat-out wrong.
We perused several calculators based on a Google search and found most to be lacking important components. For example, one calculator from a leading financial website assumes you have non-IRA funds to pay the entire tax on a conversion—if you don’t, it may not make sense to convert—and it ignores state and local income taxes. Even worse, as of January 1, 2010, it didn’t work if you made more than $100,000. Similarly, another calculator we found on the Web wouldn’t allow “2010” to be entered as the year of the conversion.
With free online calculators, expect to get what you pay for. Our office utilizes professional tools that can provide a clearer picture. |