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Are you planning to convert your current retirement account to a Roth IRA? This unique retirement savings vehicle is becoming increasingly popular among investors for several reasons. What is a Roth IRA? A Roth IRA contribution comes from income that has already been taxed. Therefore, initially there is no tax benefit, but the earnings on the money in the Roth account continue to grow tax-free.
Is the Roth IRA conversion worth it? Below is a guide on how to convert an IRA to a Roth IRA and the applicable Roth conversion rules.
The Roth IRA conversion is relatively simple. Below are the basic steps to follow for a Roth IRA conversion:
Roth conversion steps can usually be found on a financial institution’s web site. Each institution has slightly different or varying steps to complete the conversion.
You should consider a Roth conversion in the following situations:You should consider a Roth conversion in the following situations:
Fortunately, currently there is no limit to the number of Roth conversions you can do. However, you still need to adhere to the 60-day rule.
One of the key benefits of conversion is tax-free distributions. In addition, conversion reduces Required Minimum Distributions (RMDs) and the risk they might elevate your tax rate. Increasing ROTH assets may also elevate your tax diversification. In conclusion, ROTH conversion may a consideration for you.
There is no limit to how much you can convert. You can convert all or a part of your IRA to a Roth.
Roth conversions involve transferring retirement funds from a 401(k) or a traditional IRA account into a Roth account. This conversion may be accomplished by an asset rollover between the Roth and traditional IRA.
When considering a Roth conversion, they should be done with due diligence and possibly with the help of a financial professional. If you are considering a Roth conversion, or want to review how it fits in your investment plan; talk to us. Don’t navigate the Roth conversion planning process alone.