PREVIEW:

Converting or Rolling Over Traditional IRAs to Roth IRAs

You may decide, after careful review, that the Roth IRA is a better retirement savings vehicle for you than a traditional IRA. If so, you should consider transferring funds from a traditional IRA to a Roth IRA. This can be accomplished by converting a traditional IRA to a Roth IRA, or by rolling over funds from a traditional IRA to a Roth IRA. Either way, the income tax consequences and other results are the same. Assuming you qualify to convert or roll over funds, determining whether you should can be a complicated and difficult decision. You must weigh the benefits against the income tax consequences and other potential drawbacks.

 

Key Strengths

  • Qualified distributions from the Roth IRA will be completely tax free
  • For nonqualified distributions from the Roth IRA, the portion of the distribution that represents your contributions is not taxable
  • You do not have to take required minimum distributions from the Roth IRA after age 70½
  • If you use non-IRA funds to pay the income tax that results from rolling over or converting funds to a Roth IRA, those funds are removed from both your taxable estate and your countable assets
  • Qualified distributions from Roth IRAs are not counted in determining the taxable portion of your Social Security benefits

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