Word: iras
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Dates: during 1990-1999
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Regardless of your income, many states allow you to either prepay tomorrow's tuition at today's rates or save in some other tax-favorable education account, for instance one that lets your money grow tax-deferred, much like an IRA...
Start with estate planning. By converting an old IRA to a Roth, you must pay some immediate tax, but you do not have to start withdrawing money after age 70 1/2, as with an old IRA. So you can let it keep growing tax free as long as you live. It might even pay for your heirs to pick up the tax bill on the conversion, if they can afford it and you can't. The savings are that dramatic over long periods of time...
Sometime this week President Bill Clinton is expected to sign a sweeping IRS-reform bill that includes "technical corrections" governing the popular Roth IRA. Mostly, the corrections close loopholes. So don't look for any big changes, like expanding eligibility for those earning more than $100,000 a year. As I've argued before, that low limit unfairly precludes many nonwealthy couples in big cities from converting their old IRAs to a Roth. Still, nagging obstacles are about to get obliterated, opening the door for wider use of this powerful savings tool...
...Roth is, of course, the now familiar IRA that allows savers to contribute aftertax money, which grows tax free and can be withdrawn tax free in retirement. Traditional IRAs are funded with pretax money that grows tax deferred but is subject to tax upon withdrawal. Here are three key corrections in the bill that relate to the Roth...
...will be allowed to convert an existing IRA to a Roth, and you can wait until you file your tax return to revert to the old IRA penalty free. That means that if you expect to be just under the income limit, you can convert now without fear of stiff penalties should you find that you miscalculated...