Roth Conversion Explained

In this post I’ll be explaining the benefits of doing a Roth Conversion and if it’s a good choice for you. The first important factor to consider is you current and future tax rate.

If you believe that in your retirement years you will be in a higher tax rate, then doing a Roth Conversion makes sense because when you are ready to make a withdrawal, the money will come out tax free. On the other hand, if you feel you will be in a lower rate in your retirement years, then a Roth Conversion does not make any sense.

The second part to be aware of is if you will have the cash available to pay for those taxes on the ordinary income. By having the money set aside to pay the taxes will prevent your new Roth account from being reduced. This does not need to be done in one year, it can be spread out over multiple years. 

Finally if you don’t think you will need this money to live off in your retirement years then a Roth Conversion is a great choice because there are no minimum withdrawals unlike a Traditional IRA that forces you to take withdrawals at age 72.

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