Did we hit the bottom?
month: A review of the major economic benchmarks
that signal recovery and understanding the 2010
Roth conversion rule.
you have ever watched CNBC or picked up the Wall
Street Journal you have no doubt heard about economic
indicators. Those trusty little statistics that
help economists forecast recessions 12 months
after they have begun, or forcasting economic
growth after the market has rebounded for 6 months!
Yes that is a bit of sarcasm, as the indicators
can be both leading and lagging. Be that as it
may, it is important to understand just what those
indicators are and what they mean:
Claims: put out by the US Dept of Labor. This
is released weekly (every Thursday) and is a report
on the number of first time filings for unemployment.
Home Sales: put out by the National Association
of Realtors. This is released monthly and is simply
the number of single family homes / condos sold
Confidence: put out by the Conference Board
on the last Tuesday of each month. This is simply
a gauge of how consumers feel about the economy
and their personal finances.
Sales: put out by the US Census Bureau once
a month. This is a compilation of the value of
goods purchased from more than 3 million US retailers.
Goods orders: released by the US Census Bureau
once a month. This is a report on new orders for
long-lasting manufactured goods.
widely held belief is that the stock market being
a leading indicator, will recover several months
in advance of the economic indicators above. However,
the benefit of the indicators is in knowing if
the market advance is sustainable and truly representing
an economic recovery.
the 2010 Roth Conversion:
the course of this year you will begin to hear
more about the 2010 Roth IRA Conversion. This
one year event will allow all taxpayers to convert
from a traditional IRA to a Roth IRA.
what is a Roth IRA Conversion? A roth conversion
is simply when a taxpayer takes their traditional
IRA and "converts" it to a Roth IRA.
Under current tax laws the conversion is only
allowed for folks with an Adjusted Gross Income
would you want to convert? In a traditional IRA
all of the growth or pretax monies are taxable
at your normal income tax rate when pulled out
for retirement income. A Roth IRA has no tax on
any of the growth (after age 59 1/2). The catch
is that you have to pay ordinary income tax on
the amount you convert, so it generally only benefits
those that have many years until retirement so
that they can grow their account to compensate
for the taxes paid.
is a unique year in that the IRS is allowing anyone
(with any income) to convert their Traditional
IRA's to Roth IRA's. So the high income earners
that have been excluded from contributing to a
Roth over the years can now establish one. Another
benefit is that for anyone wanting to convert
now that account values are lower you have the
opportunity to let any market rebound over the
next 5 or 10 years happen inside a Roth.