By Terry Coxon, Casey Research

Until 2010 arrived, you couldn’t have a Roth IRA if your income exceeded certain limits. That restriction is gone. Now anyone with a traditional IRA can convert it to a Roth. But should you? 

Background

Roth or traditional, the central advantage of an IRA is tax deferral. Earnings accumulate and compound free of current tax, so the total value grows faster.

An IRA is fed by annual contributions made out of employment income (salary, wages, and fees). With a traditional IRA, the employment income you contribute escapes current tax. Tax time for the contributions and their earnings comes when you withdraw the money. With a Roth IRA, you pay tax on the income you contribute, but the contributions and earnings eventually can be withdrawn tax-free (provided the Roth is at least five years old when you take the money out) (read more…)