With the recent woes of the economy, you’ve probably put your investment interests on the back burner. The recent changes in retirement investing just might make you revisit and restructure your accounts.

Beginning January 1, 2010, all U.S. citizens will be eligible to roll traditional individual Retirement Accounts into Roth individual Retirement Accounts. Converting to Roth IRAs is currently only available to taxpayers with modified gross-adjusted incomes under $100,000.

The tax advantages here are tremendous. In a traditional IRA, contributions are tax deductible, but all withdrawals are eventually taxed as ordinary income at current rates of up to 35%. There is no deduction for contributing to a Roth IRA, but contributions are not taxes when they are withdrawn.

If you were to convert your funds now, you would take money out of a traditional IRA, pay taxes on it at ordinary income rates and then roll the funds into a Roth, where all further growth is tax-free. If you’re planning on building up your retirement account, the taxes on a traditional IRA can really add up. In the long run, Roth IRAs will save you vast amounts of tax payments.

Another reason to convert is that Roth IRAs do not require you to take minimum distributions at age 70 ½ as normal IRA plans do. This will allow you to manage your money to match your personal requirements.

Roths have gained popularity over recent years and are now the largest repository of U.S. retirement wealth. Roths hold $4.75 trillion while 401K plans and private-sector donation plans amount to $3.49 trillion and $2.33 trillion, respectively. Much of this recent growth of Roths can be attributed to rollovers.

It is important to educate yourself in multiple areas when you are developing your personal financial plan. Seeking the advice of a professional will also prove to be very beneficial. Good luck and invest wisely!

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