It drives me crazy that the folks in Congress are always making speeches that Americans need to save more for their retirement. But then they leave in place pension laws with far too many twists and turns while passing new ones that seem ever more complicated.

Here's an example: An employee is 49 years old and she can set aside a maximum of $16,500 in her company's 401(k) this year. But if she worked at a company with a SIMPLE retirement plan (that stands for Savings Incentive Match Plan for Employees of Small Employers), she could only salt away a maximum of $11,500. And if she stayed home to take care of the kids, her limit is $5,000 in an IRA. Go figure.

Still it's important to stay on top of rule changes. And one of the most important in recent years involves the Roth IRA. Up until next year there has been a $100,000 earnings cap on anyone wanting to convert their traditional IRA into a Roth IRA. The cap lifts in 2010.

The attraction of a Roth is that all money you earn investing in it isn't taxed by Uncle Sam when withdrawn during retirement. The contributions are funded with after-tax dollars, with a maximum of $5,000 a year if you're age 49 and younger and $6,000 if 50 and older. A traditional IRA is funded with pre-tax money and you'll pay your ordinary income tax rate on withdrawal. An added benefit of Roth conversion is that, unlike the traditional IRA, there is no mandatory withdrawal beginning at age 70 1/2.

Little wonder that financial planners are working with their wealthy clients to figure out whether it pays to dip into IRAs and turn them into a Roth. I expect we'll see the Roth conversion equivalent of a gold rush starting next year. And in many cases at least a partial conversion makes sense for the well-heeled.

But what about those with more moderate incomes and no certified financial planner on retainer? I'd be wary. The reason is taxes. When you convert from a traditional IRA to a Roth, you need to pay income taxes on the withdrawn money. A sensible rule of thumb is that it probably pays to convert if you have additional savings to tap for the tax tab, but it doesn't make sense if you would have to use IRA money to meet the tax levy. Also, conversion probably won't make sense if you expect your tax rate to be lower in retirement than it is now.

But some answers come from stepping back and thinking about your overall goals. For example, even if you do have the savings, is that the best use for the money? Is it smarter to tap into your savings to pay the Roth conversion tax bill, keep the money available as an emergency fund, or use it to pay for your child's college education?

Chris Farrell is economics editor for American Public Media's "Marketplace Money." Send questions to