Beginning in 2010, more people can contribute to a Roth IRA.

Now higher income earners will be able to open a Roth IRA if they convert their Traditional IRAs, Non-Deductible IRAs and some 401Ks from previous employers (or other qualified retirement plans). There’s no limit on the conversion amount now or in the future. 

The tax advantages of a Roth IRA.
Unlike Traditional IRAs, where qualified withdrawals are taxed at the owners’ tax rate at that time, qualified Roth IRA withdrawals are tax-free. This means that even the interest or earnings on the Roth are not taxed. In contrast, taxes are paid on these earnings with a Traditional IRA. Depending on the situation, this distinction alone can make quite a difference in retirement income for the IRA holder. 

Another difference between the two IRAs is how contributions are handled. When contributions are made to a Traditional IRA, they are tax-deferred. But the Roth contributions are made with after-tax dollars. 

A one-time benefit. . . pay taxes over a 2-year period. 
Any conversion of a tax-deferred retirement investment to a Roth means the holder must pay tax on the full amount when opening the account. But there’s a one-time option which allows individuals to divide that tax between the 2010 and 2011 tax returns. That means the tax can be paid up until 2012. This 2-year option is only available on plans that are converted in 2010. It eases the payment of the tax liability and makes the conversion to a Roth much more attractive. 

A tax-free inheritance for heirs.
For business owners who have built up assets over the years and wish to leave an estate to the next generation, a Roth IRA proves an excellent choice. With a Roth IRA, their inheritors may never owe income tax, although under certain circumstances, estate taxes could apply. 

One of the safest Roth IRAs. . . a Certificate of Deposit.
In these uncertain times and with fluctuating Wall Street investments, one of the safest places for a Roth IRA may be a Certificate of Deposit. These Roth IRA holders are secure in the knowledge that their funds will be safe and there for them when the need the income in retirement. Any community bank can set one up for those interested in a secure retirement. Plus, a Roth IRA held at a bank is independently insured by the FDIC from the owner’s other deposits for up to an additional $250,000.

The Roth has more advantages besides the tax benefits.
A Roth never requires that an owner take a distribution. (Traditional IRAs, on the other hand, require that distributions begin at age 70½.) And, if a Roth conversion turns out not to be advantageous for the owner, IRS rules allow the individual to re-characterize or “undo” the conversion within certain time limits. 

For any business owner who hasn’t considered a Roth IRA, 2010 may be the year for him or her to take a second look at this retirement plan.