If you have a traditional IRA, you might benefit from converting some or all of it to a Roth IRA. A conversion can allow you to turn tax-deferred future growth into tax-free growth. It also can provide estate planning advantages: Roth IRAs do not require you to take distributions during your life, so you can let the entire balance grow tax-free over your lifetime for the benefit of your heirs.
There is no income-based limit on who can convert to a Roth IRA. But the converted amount is taxable in the year of the conversion. Whether a conversion makes sense for you depends on factors such as:
- Your age
- Whether the conversion would push you into a higher income tax bracket or trigger the 3.8% net investment income tax
- Whether you can afford to pay the tax on the conversion
- Your tax bracket now and expected tax bracket in retirement
- Whether you will need the IRA funds in retirement
We can run the numbers and help you decide if a conversion is right for you this year. Contact us: firstname.lastname@example.org | 804.747.0000
Source: PDI Global, Image Source: Getty Images
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.