Is a Roth Conversion Right For You?

Is this the right time for a Roth conversion?*  YES!Be Roth Smart: An Investment Guide to Roth IRAs

Why have a Roth?

Growth and Income are tax free vs. a traditional IRA which taxes the initial premium and the income.

Taxes are low and will most likely rise.

The market is down so you will move less.

Incomes may be down.

Why are these factors good?

Taxes are paid on the amount being converted.

With the market down, you are converting a smaller dollar amount.

Lower tax rates mean paying less in tax on a smaller amount.

Your income may be down this year which means a lower tax rate.

Who should consider a Roth conversion? *

You believe your tax bracket will be higher in retirement.

You want tax free income.

You do not want to take RMDs.

You want to maximize your estate.

Your savings are not subject to RMDs potentially leaving more for heirs.

Withdrawls are tax-free during their lifetimes.

Who should not consider a Roth Conversion? *

Taxes on the conversion must be paid by April 15 of the following year.

The Roth conversion needs to sit for 5 or more years or be hit with taxes and possible 10% penalty.

The Roth conversion puts you in a higher tax bracket.

The Roth conversion increases your taxable income affecting your Social Security taxes and Medicare premium.

How do you do a Roth Conversion?

  1. Money is in a traditional IRA
  2. Pay taxes on the amount converted
  3. Add to existing Roth/Open a new Roth

Roth Conversions cannot be undone once the conversion is complete.

Roth Conversions may be a full or partial amount of your IRA.

Consult your tax professional! * 

Need help knowing your options and doing the conversion?  I can help you. *

* Pat Frederiksen does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.


Is a Roth Conversion Right For You?
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