Yes, you can. As of 2010 there are no income limits prohibiting you from doing this. However, you will have to look at your personal financial situation to decide whether it makes sense for you. There are many factors that affect whether a traditional IRA or a Roth IRA works best for you.

Your Roth IRA taxable income is just one of those. A 401k consists of tax deferred savings. A Roth consists of tax free savings once the tax has been paid on the money you put into it. When you choose to roll a 401k into a Roth IRA, you will have to pay the income tax on the entire amount you are rolling over. For 2010 you do get a small break, you will be able to spread the taxes over the next two years instead of one. If you have to pay the taxes out of the money you are rolling over, it may not be worth it.

Your tax bracket also makes a big difference. Do you expect it to be higher or lower when you retire? If you expect it to be higher then you are better off paying the taxes now and increasing your funds tax free after that. You also should consider your retirement plan. Do you have at least five years before you need the funds? If not Roth IRA withdrawals will force you to pay the 10% penalty. That could easily wipe out any benefit the Roth IRA provided.

If you have a significant number of years left before retirement and you can afford to pay the income tax on the 401k to Roth IRA conversion from other funds, you will most likely find that you will be better off by the time you reach retirement if you convert the 401k into a Roth IRA. Of course, this assumes that you have earnings.

If you are like most people that saw their 401k funds dwindle over the last few years, you may have lost your faith in the stock market. Stocks are not the only investments you can hold in a Roth IRA. When you estimate your earnings, make sure you put in a reasonable figure for the amount of growth you expect to average each year.

You can find a Roth IRA calculator at http://www.dinkytown.net/java/RothIRA.html . Other tips for what to consider when making your decision can be found at http://personal.fidelity.com/products/retirement/rollover/rolloverintro.shtml.cvsr . Every person’s situation is slightly different, so there are no universal rules.

Personally, I found the Roth IRA conversion attractive. Having made the decision ten years ago, before the disastrous stock market conditions, I have already reached the point where the Roth IRA was the better investment choice but then I was a fairly aggressive investor. If your risk tolerance is lower, it may be difficult to see the benefits within that time frame. All you have to do, is look at the stock market performance for the last few years to know how difficult it can be to have any earnings. If you end up with no earnings, converting to a Roth IRA will not have been worth the effort.

Look at your investment style, your past performance and your risk tolerance. Those will provide you with additional clues as to whether you can expect to benefit from a roll over of 401k funds into a Roth IRA. Many financial advisors will caution you to take a slightly less aggressive approach to investing with your retirement funds. That could also have an affect on your decision and your results. Choose wisely.