Hello and welcome to Moneygirls Quick and Dirty Tips for our richer life.

I'm your host, Laura Adams.

Today's topic is about a way to actually profit from the decline of the financial markets

by converting a traditional IRA into a Roth account if you're eligible.

One of the major distinctions between a traditional and Roth IRA is that Roth accounts

require you to invest after-tax money.

You don't get an upfront tax break like you do with the traditional IRA.

But once taxes are initially paid, you never have to pay tax on funds in a Roth account again.

As long as you've had a Roth for at least five years, when you begin to take qualified

distributions, after the age of 59 and one half there is nothing to pay

Uncle Sam that's a nice retirement gift. If you have a traditional IRA

chances are its value has decreased this year due to the volatile stock market.

That's actually good when it comes to converting it to a Roth.

This is because you must pay income tax on any amount you convert that wasn't previously taxed.

How much tax you pay depends on your income tax bracket and the total amount that you'll convert

to a Roth. You may be wondering, why would I want to take a tax hit now?

Well, the reality is that tax must be paid on that money eventually. If it remains in a traditional

IRA, you are simply deferring taxes until the time you begin to take distributions in the future.

But what if tax rates are lower now than they will be in the future or what if you'll be in a higher tax

bracket at retirement than you are now in either of these situations it could

make sense to pay less in taxes now than to wait and pay more in the future.

Besides the timing of taxation, another difference between traditional and Roth IRAs is what

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