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August 19, 2009: Roth IRA opportunity in 2010 for Texas investors.

A unique opportunity will arise next year for Texas investors. You will be able to convert a traditional IRA into a Roth IRA with no limits on your income.

A little explanation first. With a regular, or traditional IRA, you can put aside money and then deduct the amount from your income on your taxes, which means that money doesn't get taxed before going into the account. It then grows tax-free also. However, when you pull money out of a regular IRA in retirement, it is taxed as ordinary income. With a Roth IRA, the money that goes in is after-tax money, meaning no tax deduction. It then grows tax-free, however, when you take the money out in retirement, there are no taxes due because you already paid taxes on the money in the beginning.

The law lets some people convert regular IRAs into Roth IRAs, but it is limited to Texas investors below a certain income level. However, in 2010, there is no income limit, so anyone in Texas will be able to convert all, or a portion, of their regular IRAs to a Roth IRA. You will pay taxes on that money as income (you can spread the tax over both 2011 and 2012), but obviously, you won't have to pay taxes when you take the money out in retirement.

Should you make the change? There's no clear answer because no one knows exactly what their income and tax bracket will be in retirement, or even what the tax code will look like years from now. Because of this, many investors try to keep portions of their money in different "tax buckets", so they can choose where to pull money from first, and where to let money grow the longest, once they are in retirement. This might mean keeping portions of your money in a regular taxable account, a traditional IRA, a Roth IRA and any variable annuities or life insurance.

July 29, 2009: Is it too late to get in the market? Ask your Texas Financial Planner about your portfolio's current allocation.

Many people don't realize that the US stock market indexes are up over 40% from the March 2009 lows. Although still down substantially from one year ago, the move up has happened quickly and occured just as many people were giving up on the market and moving money to cash.

So what do you do now? Whether your portfolio is now largely in stocks or largely in cash, you have the same question. Will the market keep going up or is this a bear market rally that will leave the market dropping back to its lows?

Talk to your Texas Financial Advisor or Texas Financial Planner to have them review your current portfolio and asset allocation. Make sure that the core of your portfolio is appropriate for your investment goals and risk tolerance. This portion should likely have some balance between stocks and bonds no matter what the current economic conditions are.

Now you can use smaller parts of your portfolio to prepare for whatever the next year brings. Many investors are keeping a slightly higher than normal allocation to cash after seeing the market hit every other asset class last year. You can also put a small portion of your investment portfolio in aggressive stocks, which will benefit the most if the market keeps going up. Your Texas investment advisor can help structure your portfolio to meet your investment goals.