Converting To A Roth IRA
If your adjusted gross income is $100,000 or less, you can convert your traditional IRA to a Roth IRA. Keep in mind that you'll have to pay income taxes on the amount you convert just as you would with a traditional IRA distribution.
The decision to convert your traditional IRA to a Roth IRA is a complex one. The chart below provides some of the key factors that will help you determine if you are a good candidate.
Conversion
to a Roth IRA
may be
appropriate if: |
Leaving assets in a traditional IRA may be appropriate if: |
You have 10 or more years to save until retirement |
You have fewer than 10 years to save until retirement |
You have enough money outside your IRA to pay the taxes |
You will need to tap your retirement account to pay the taxes on a conversion |
Your adjusted gross income is less than $100,000 |
Your adjusted gross income is more than $100,000 |
You expect to be in the same or higher tax bracket when you retire |
You expect to be in a lower tax bracket when you retire |
The IRS has done what it can to make conversion easy. You can have a fund transfer of your traditional IRA assets to a Roth IRA, which is done between the trustees of the two IRAs, whether they are in the same or different financial institutions. Or you can do it yourself, moving the assets from the traditional to the new Roth IRA, which is subject to tax withholding and which must be completed within 60 days of withdrawal (the 60-day deadline can be extended in hardship cases). |
