IRAs (individual retirement accounts) have long been a staple of retirement saving, and this year, the Internal Revenue Service (IRS) introduced a new rule that makes Roth IRAs available to more investors.

The IRS has removed the $100,000 modified adjusted gross income limit for conversions from Traditional IRAs or 401(k) accounts to Roth IRA accounts. For conversions in 2010 only, investors have the option to pay the resulting taxes from a conversion in full in 2011 or to split in half the tax payments in 2011 and 2012.
While the new options could be beneficial to many Americans, a recent survey commissioned by online investing firm Scottrade found most Americans are unaware of the 2010 Roth IRA conversion options. Scottrade, like many other financial services companies, is educating its customers about the changes, as well as the overall benefits of IRAs. 

Kristin Grupas, customer education manager at Scottrade, oversees Scottrade’s initiative to help investors understand their options when opening an IRA. “An IRA can be a simple way to build a solid financial base for your retirement dreams,” said Grupas. “It’s essential to do your homework and take an in-depth look at the recent changes and the differences among the types of IRAs to ensure you select the one that best matches your investing strategy.”

To help new investors understand IRAs and the recent changes, Grupas answered three common questions she finds investors typically have when opening an IRA account:

How do I determine the right type of IRA for me?

There are a number of different IRAs available for investors, such as Traditional, Roth, SEP and Rollover. Choosing and understanding the IRA that’s right for you is important.

The most common IRA types are Traditional and Roth, with one of the biggest differences being the tax benefits. With a Traditional IRA, contributions may be tax-deductible.

In a Roth IRA, contributions are made with "after-tax" dollars, or have already been subject to income tax. Overall, a Traditional IRA puts more money in your pocket from your paycheck, while a Roth IRA provides more control over withdrawals because it allows withdrawal of contribution dollars at any time, generally tax-free. More information can be found at

I regularly contribute to a 401(k). Can I still consider an IRA?

Yes, if you are already contributing to a 401(k), an IRA account can act as an additional vehicle for your retirement savings, and in some instances, offer more freedom to diversify and utilize investment products that may not be offered through your 401(k). In addition, thanks to the new conversion rules for 2010, a 401(k) can be rolled over into a Roth IRA for those who earn more than $100,000 modified adjusted gross income.

How much should I contribute?

The amount an IRA holder is eligible to contribute is based on income and age. For a Traditional IRA holder, contributions are taken pre-tax. For a Roth IRA, contributions are made with after-tax dollars. The IRA holder can make a contribution to an IRA based on their yearly earned income, up to a maximum of $5,000 or $6,000, depending on their age. Investors can contribute regularly throughout the year.  Contributions between January 1 and April 15 may be applied to the prior tax year. 

“Investors should be aware that there are many different options for retirement savings,” said Grupas. “Education is the first step toward finding the investment vehicle that’s right for you.”

Investors can learn more about IRAs, and access planning tools and calculators at Scottrade’s online Knowledge Center at For more information about Scottrade’s 2010 American Retirement Survey, visit  

Information regarding IRAs is for general informational purposes and is not intended to provide personal investment, tax, accounting or legal advice. Scottrade, Inc., its representatives and affiliates do not make investment recommendations or otherwise provide personal investment, tax, accounting or legal advice. Consult with your financial, tax and legal advisors regarding any specific investment, tax, accounting and legal issues. Member FINRA/SIPC.