The Tax Increase Prevention and Reconciliation Act of 2005 created changes to the rules for converting traditional IRAs to Roth IRAs. The rules went into effect beginning January 1, 2010. Most important of those rules is the fact that such conversions will be available to taxpayers with incomes at any level, whereas they were previously only possible for those with incomes less than $100,000. Furthermore, the tax related to such a conversion will be payable across two years, rather than only in the year taken.

Not entirely sure what an IRA is?

You're not alone. According to a recent AARP study, 44 percent of American adults don't understand how IRAs work, and 36% don't know if they're eligible to contribute to them. Despite the dramatic tax benefits, only about 40 percent of American households have an IRA, and many of those are dormant. Feel free to review our website, and particularly our blog, to gain a deeper understanding of what these vehicles are and what they can do for you.

Should you convert?

Not necessarily. That is why it is important to consult a professional advisor to assist in this decision. Unfortunately, most advisors are paid on a commission and/or assets under management basis, so they have an incentive to see that you convert your funds into a Roth IRA. There is currently a lot of excitement in the financial services industry about the "money in motion" that will result from these changes. At Foothills Financial Planning, we're paid for the advice we provide to our clients, regardless of whether or not they make changes in their portfolios. There is no financial incentive for us to recommend a change. However, for many people, moving to a Roth this is a great opportunity to enable their investments to grow on a fully tax-free basis.

For a limited time, Foothills Financial Planning is offering a Conversion Assessment to determine if converting from a traditional IRA to a Roth IRA makes sense for you. The fee for this assessment will be a flat $399, regardless of your situation and the amount of time it takes to do our analysis. We'll gather pertinent information from you, perform our analysis, and review our recommendation with you. The recommendation will include the pros and cons of a conversion to allow you to make an informed decision about your retirement. Note that traditional IRAs may not be the only accounts available for conversion. Other retirement accounts may also be eligible, including SEP IRAs, SIMPLE IRAs, 403b accounts, and Qualified accounts, such as 401ks.