Converting from a Traditional IRA to a Roth IRA

I am a 76 year old retired widow. I have both a traditional IRA and a Roth IRA. Can I convert some funds from the traditional IRA to the Roth IRA, pay income tax now (if any), and then have the presently devalued stocks perhaps grow tax-free in the Roth as well as receive the other benefits of the Roth IRA?

There are a couple of requirements for you to be eligible to convert amounts from your traditional IRA to your Roth IRA. They are as follows:

1.) For years before 2010, if your modified adjusted gross income is greater than $100,000, you can not convert a traditional IRA to a Roth IRA. (You can calculate your modified adjusted gross income using IRS publication 590.)

2.) You did are not married filing separately.

3.) If you inherited a traditional IRA from a person other than your spouse, you can not roll it over and convert it to a Roth IRA.

If you take a distribution from your traditional IRA account, then you must roll it over within 60 days to the Roth IRA account for the conversion to be effective. An even easier choice is to direct the trustee of your traditional IRA account to transfer the funds to the trustee of the Roth IRA account. This is called a trustee to trustee transfer.

Other than the fact that distributions from a Roth IRA are not subject to taxes, there are other significant benefits to the Roth IRA over the traditional IRA. For one, a Roth IRA is not subject to the minimum distribution requirements. Secondly, you can name your grandchildren as beneficiaries of the Roth IRA and they can receive tax free distributions from the account over their lifetime. (However, you must weigh the benefits over the taxes you may pay this year as part of the conversion.)

In 2010, there is no limit on the amount of income you can earn to convert traditional IRA funds to a Roth IRA. Additionally, if you convert in 2010 you can spread the tax bill out over two years.