Personal Finance: Q & A

Roth IRA Conversion Usually Not For Seniors

Portability makes 401(k) plans great retirement vehicles for women

Q I am retired and wonder whether to convert my not-too-large individual retirement account to a Roth IRA. I need to keep my investments liquid. Is there a period during which money may not be withdrawn from a Roth IRA?

- D.B.

A Usually, it won't make sense for a person of advanced years to convert to a Roth, says an IRA specialist with Astoria Federal Savings Bank, New York. You can withdraw your principal any time. But with a Roth, you would owe a penalty and taxes on earnings withdrawn in the first five years. Some qualified exceptions: buying a first home (for you, your children or grandchildren) or if a person becomes disabled. One advantage of a Roth is that you need not take yearly distributions, required with a regular IRA after you turn 70-1/2. The account can be passed to heirs tax free. The rules can get complicated, so you might want to check with an accountant.

Q My employer says its contributory retirement plan is especially good for women employees. Why would that be the case?

- J.M., New York

A Contributory plans, such as 401(k) accounts, are sometimes referred to as "salary reduction plans." You contribute a percentage of your salary, often matched by the company up to a certain percentage. The plans are "self-directed," that is, the employee selects the types of investments, usually from a menu of choices. What is especially advantageous for women employees, who often change jobs frequently for family reasons, is that the plans are "portable." You don't have to stay a certain number of years to be "vested," or eligible, for a pension. If you change jobs, you can have your account transferred (rolled over) to a new 401(k) or to an IRA. But be sure the rollover is done by direct transfer or the money will be taxed.

Financial advisers recommend that you contribute as much as possible - at least up to the matching level.

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