• Learn how to convert your existing IRA to a Roth.retirement worries image by Jale Evsen Duran from Fotolia.com
  
  An IRA is an individual retirement account which is primarily used to save money for retirement and is considered a tax shelter as long as it is used for this purpose. However, if you own a traditional IRA, you may find that a Roth IRA is more beneficial to you. The traditional IRA allows you to make pre-tax contributions and taxes your distributions at ordinary income tax levels, whereas a Roth IRA allows you to make after-tax contributions while receiving distributions on a tax-free basis.
  
  

Income Rules

• Normally, there is an income limitation on IRA contributions for Roth IRAs of $100,000. For 2010, this limitation is removed. This means that if you are a high income earner, you can roll your money from an existing IRA into a Roth IRA without violating any IRS income guidelines. You still will not be able to contribute to your new Roth IRA, however, at this income level.
  
  

Early Distributions

• You can roll your existing IRA over to a Roth IRA without penalties, even prior to age 59-1/2. You will pay the income taxes on your conversion at ordinary income tax rates. This will allow you to have more time to grow your nest egg under the Roth IRA so that you can potentially have more tax-free income at retirement.
  
  

Tax Deferral on Your Conversion

• Even if you convert your IRA in 2010 to a Roth IRA, you can defer some of the taxes due until 2011 and 2012. The IRS will allow you to split up the taxes due so that 50 percent of the conversion amount can be claimed as income in 2011, and the remaining 50 percent can be claimed in 2012.