This guest blog post is contributed by Boomerater, a free online resource for Baby Boomers with advice on everything from investment planning to top vacation packages. Seniors for Living’s properties are featured in Boomerater’s Alzheimer’s Assisted Living directory.

A new Q&A discussion from Boomerater’s forums appears here each Friday. In this week’s post, members share their advice about a key financial decision facing boomers:  whether to convert a traditional IRA to a Roth IRA.

Question: Is it true I can convert a traditional IRA to a Roth IRA to save paying income tax on the earnings?  I’m planning to retire in a few years, but with the economy the way it is should I even still contribute to my IRA?  I was thinking of investing in gold – it seems safer.

Reply #1 – In 2010 people with adjusted gross incomes of more than $100,000 have the opportunity to convert a traditional IRA to a Roth IRA and spread the tax bill over two years.  The variables to consider before converting include:

• What tax bracket are you in now versus your anticipated tax bracket at retirement?
• Can you afford to pay the tax bill on the conversion?
• What is the investment performance? (The more an investment gains after the Roth conversion, the better to have already paid the tax bill on a smaller dollar amount.)

As for the investment of gold, for simplicity, I prefer gold and gold mining exchange traded funds. While owning physical gold can be very attractive, you do have to keep it in a safety deposit box. Purchasing and selling gold are fraught with difficulties, time delays, large commissions, and the opportunity to be taken advantage of by unscrupulous hucksters.

Reply #2- Other variables would include your age, attitude toward risk, and participation in other retirement plans. Whether or not gold has already had a substantial run to the upside, you’ll need to consider how it “fits” among your other personal and retirement assets, and if it reduces or increases your total asset (portfolio) risk. There are no” rules of thumb” that can be relied upon.

A competent financial planner should be involved to discuss the risks, your investment timeline/horizon, tax situation now and in the future, and alternatives that are more likely to accomplish your own unique objectives.

Reply #3- Converting from a traditional to a Roth IRA can be a great financial decision, but a word of caution before you rush into this.  The key advantages to the Roth IRA are:

1) you pay taxes up front so your disbursements when you retire are tax free – a big plus if you expect your income, and therefore your tax rate, will increase, and

2) with a Roth IRA you are not required to take minimum distributions, whereas with a traditional IRA you must start distributions after age 70 ½. and pay taxes on those distributions.

3) You can spread the income tax on your conversions in 2010 over two years, paying half in 2010 and half in 2011.

So what’s the downside?

1) Converting can bump you into a higher tax bracket, so calculate the tax you will pay to determine if the conversion is worth it

2) Don’t convert if you think your tax bracket will fall, not rise.  Why pay higher taxes now than you will have to pay in the future?  Two other tips:  Don’t put all of your traditional IRA eggs into one existing Roth IRA basket, spreading your money is a safer bet.   And, after you convert be sure to watch what’s happening.  If the value of your converted Roth IRA drops significantly you can undo the conversion, reverting back to a traditional IRA.  This is a valuable tactic you should not overlook.  Unless you will very diligently keep an eye on your investments, you will be safer having your financial planner advise you.

Find out what others had to say and give us your advice about converting a traditional IRA to a Roth IRA on Boomerater.com.