Consider a Roth IRA or Roth 401(k) Conversion
Up to now, households with a combined income above $160,000 were ineligible to convert traditional retirement accounts to Roth accounts. But in 2010, income limitations were eliminated. As a result, conversions to Roth IRA accounts are up 400 percent, according to Fidelity Investments.
Roth IRAs do not have mandatory distributions (in a traditional IRA, distributions must start at 70.5 years old), which makes them appealing for people who plan to leave the money as an inheritance rather than rely on it for retirement, says Lew Dymond, principal in the Wealth Counsel.
Since taxes on conversions are expected to increase in 2011, "it makes sense to convert this year if you are planning on leaving your IRA to your children," he says.