Bush's tax-cut law seen benefiting more

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Dan McGroarty says the new tax-cut law President Bush signed last week "opens a door for me."

It would allow households with annual earnings over $100,000 to switch their traditional individual retirement accounts (IRA) to Roth IRAs beginning in 2010, which means they would not pay taxes on the money when they withdraw it during retirement.

Before the new law, only households with income less than $100,000 were given the option to switch.

Mr. McGroarty, 48, a principal in a Chevy Chase public policy consulting firm, is looking for the best way to invest his retirement nest egg, but also is concerned about a wrong move.

"I'm definitely going to work through with my financial planner the pros and cons," he said. "It's extraordinarily complicated to puzzle this through."

The Tax Increase Prevention and Reconciliation Act of 2005 creates incentives for billions of dollars in savings to be transferred to Roth individual retirement accounts.

Sixteen percent of U.S. households earn at least $100,000, according to a 2004 census report.

Roth IRAs are popular not only because they allow investors to avoid paying taxes on the earnings when the money is withdrawn but also because they are not required to take minimum distributions at age 70, as they would be with traditional IRAs.

However, financial planners say one size does not fit all for IRAs, meaning investors need to consider which type of IRA is best for them.

Traditional IRAs allow investors to avoid paying taxes on their IRA contributions when they pay into the fund. Roth IRAs allow no tax deduction when a contribution is made.