IRA CD Rates

2010 is looking like it's going to be a great year for retirees. In January everyone that has a traditional IRA CD rates will be able to convert their account into a Roth IRA. But there's some details you need to know before you run out to convert your accounts.

A Roth IRA has the opposite benefits that come with a traditional IRA. The Roth IRA is funded with after-tax dollars while the traditional IRA is pre-tax dollars. However, distributions from a Roth IRA are tax free while distributions from a traditional IRA are taxed as regular income. Roth IRA holders are not required to take distributions while traditional IRA holders must take distributions after age 70.

Despite the benefits of Roth IRAs, traditional IRA holders outnumber Roth accouns 2:1.

So why is this? Well for starters traditional IRAs are exactly what they sound like, they're traditional. They were created over 20 years before Roth IRAs were made. You also get immediate tax benefits for a traditional IRA while with a Roth IRA, you need to wait some time to see your benefits.

It used to be that your income needed to be under $100,000 to convert a traditional IRA into a Roth, but starting next year anyone can do it. The income tax you need to pay on the conversion can be spread over 2 years. It's a good deal if your interest is getting to be quite high, but there's some things you need to avoid.

You should take the time to do the math for yourself. A Roth IRA has the benefit of being a tax-free income at a later date. You also don't have to convert your entire IRA all at once. You can convert it a piece at a time.

If you do a conversion you should take the time to fully understand the tax implications that go along with it. Learn the rules of conversion correctly. Income from converting could bump you up to a higher tax bracket, so make sure you know that before moving forward.