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Retirement Planning

  Those who have been shut out of the Roth IRA conversion strategy because of the $100,00 income limitation can now take another look at converting. Beginning in 2010, all taxpayers, regardless of their income level, can convert their traditional IRA to a Roth IRA. Although the conversion is taxable, the income and the resulting tax can be averaged over two years.

  Starting in 2007, inherited retirement plans can be rolled over tax-free into a new IRA to defer distributions. Previously, only surviving spouses were allowed this option. Nonspousal beneficiaries had to accept the distributions--and pay the taxes due--with five years.

  A 2001 tax law set higher contributing limits for IRAs, SIMPLEs, 401(k)s, and 457 plans. But these larger contributing amounts were set to expire after 2010 along with most of the other provisions in the 2001 law. The Pension Act makes these higher contribution limits permanent and generally indexes the limits for inflation in the future.

  The saver's credit that provides for a credit of up to $1,000 annually for lower-income individuals' contributions to retirement plans is made permanent. The income-based phase-out ranges for the credit will be indexed for inflation, a change that will make the credit available to more taxpayers.

  The tax credit for small businesses that start a new retirement plan (up to $500 per year for three years) is made permanent.

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