Re: IRA and 2010 Roth IRA conversion
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Assume a person rolls a 401k into a traditional IRA then converts to a roth IRA.
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This would be a terrible move. Taxes would be due on 100% of the money, since the 401k contributions were pre-tax.
The 2010 conversion is a good idea largely for high earners who are barred from participating in a Roth directly, and who are converting non-deductible IRA money.
For lower earners, the better path to Roth is simply to make your Roth contributions as you go along.
To be more precise, for lower wage earners, you should:
1. Fund your 401k to the level where you have maxxed out any company match.
2. Fund your Roth IRA
3. Fund the remainder of your 401k up until the 15k cap.
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