Roth Conversions
A conversion provides the means for a Traditional IRA owner to move his/her IRA assets into a Roth IRA in order to take advantage of the possible tax-free and penalty-free benefits that are not available in a Traditional IRA.  Previously, income limitations prohibited many IRA owners from converting their IRA assets into a Roth IRA.  Effective January 1, 2010, the income limitations have been removed, making conversions available to everyone.

Converting assets from a Traditional IRA to a Roth IRA is a taxable event, since assets are being moved from a pre-tax investment to an after-tax investment.  New rules for 2010 allow individuals who convert in 2010 the ability to include the conversion income in 2010, or they may delay payment of income tax and include the conversion income ratably over the next two years, 2011 and 2012.

These new conversion rules create a financial planning opportunity for many IRA owners who were not eligible to invest in a Roth IRA previously.  Still, individual circumstances and future assumptions will determine whether a conversion might be beneficial.  An IRA owner should always consult his/her tax or legal professional for help in making the right decision.

Types of IRAs available at Berkshire Bank

Traditional IRA
A savings plan designed to help you save for retirement that provides the benefits of tax-deferred interest and, in many cases, tax deductibility.

Roth IRA
A non-deductible retirement savings plan that features tax-free accumulation of interest and capital gains and withdrawals for certain distribution reasons.

Catch-Up Contribution
If you are 50 years of age or older, you may contribute an additional $1,000 "catch-up" contribution for a total annual contribution of $6,000.