If you have existing retirement assets in a traditional IRA, you may want to consider converting those assets to a Roth IRA. Possible benefits of converting include tax-free distributions at retirement, no required minimum distributions at age 70 ½, and leaving income tax-free assets to your heirs in the event of your death.
While Roth conversions are not subject to early distribution penalties, they are subject to income tax.
Your tax-free potential is maximized if you pay the taxes from your current income or personal savings, not your IRA. Make sure you have the cash to pay the taxes required to convert to a Roth IRA.
Assets converted to a Roth IRA must be invested for at least five years before taking distributions or a significant income tax penalty may apply.
For tax years starting in 2010, the $100,000 modified AGI limit for conversions to Roth IRAs is eliminated and married tax payers filing a seperate return can now convert amounts to a Roth IRA.