What are the pros and cons to converting a regular IRA to a Roth IRA? Currently I have a regular IRA at my credit union that is earning about 2% interest. There is a $36,000 balance. If I convert it to a Roth IRA will I have to pay income taxes on the balance? I am single and make less than $95,000 per year.

Thank you,
Gibson

Pros: do it while the law still allows, eliminates mandatory distribution, can be pass to heirs as a Roth, may have an option to convert during a year when your marginal bracket is low, future taxes may be higher, can be a great idea if you are taking off some months in the year you convert or are laid off and your taxable income drops.

Cons: better have the outside cash to pay to taxes, may jump your tax bracket, taxes now vs later are often a wash, you absolutely need to consult with a local tax prep or tax advisor to make sure you got it right, future tax brackets may be lower such as when you retire in a lower income tax state but converted in a high income tax state.

Alternatives: partial conversion

Your style of investing and general track record also can make a difference, but if that applies you probably already know what I am talking about. I have some friends that have built a small Roth empire by using some high return IPO investments... not typical, but could be a factor for a very small number of people.