Roth Conversions
We can guide you through a Roth IRA conversion in which you move assets from a traditional IRA, 401(k), or other tax deferred retirement account into a Roth IRA.
In simple terms, you pay taxes now on the amount converted. In return, assets inside a Roth IRA can grow tax free, and withdrawals may be taken tax free, provided you’ve had a ROTH IRA somewhere for 5 years.
The amount converted is treated as taxable income in the year of conversion and taxed at your marginal rate. If your IRA or Employer plan include both deductible and nondeductible contributions, the tax calculation can be more complex. Always consult your CPA or tax professional before proceeding.
• There is no dollar limit on Roth IRA conversions
• Conversions must be completed by December 31
• Roth conversions generally favor those who expect higher tax rates later
• Additional taxable income may increase Medicare premiums or impact other income- based benefits.
• Roth conversions cannot be reversed once completed
A Roth IRA conversion may make sense if you
• Do not need access to the converted funds for at least five years
• Expect to be in the same or a higher tax bracket in retirement
• Can pay conversion taxes using nonretirement assets
• Plan to leave assets to heirs rather than spend them in retirement
A Roth IRA conversion may not be appropriate if you
• Are uncertain about your current year tax situation
• Would need to use retirement assets or strain liquidity to pay taxes
• Are pushed into a higher tax bracket by the conversion
• Expect to be in a lower tax bracket during retirement
Five consideraKons for a Roth IRA conversion
1. Time it carefully
Conversions often work best when markets are lower, income is temporarily reduced,
deductions are higher, or a combination of these factors exists.
2. Manage taxes intentionally
Spreading conversions across multiple years may help control taxes and reduce the risk
of moving into a higher bracket.
3. Review the full picture
We help evaluate current income, future tax exposure, retirement goals, and cash flow
before any decision is made.
4. Coordinate with your tax professional
We can help evaluate potential impacts, but tax advice should come from your CPA or
qualified tax advisor.
5. Pay taxes outside the account
Using nonretirement assets to pay conversion taxes preserves the potential for tax free
growth inside the Roth IRA.
A Roth IRA conversion can be a powerful planning tool, but it is not right for everyone. We can help review current income, future tax exposure, reKrement goals, and cash flow as part of an overall planning discussion.
This information is for educational purposes only and is not intended as tax, legal, or investment
advice. Tax rules are complex and subject to change. Please consult your tax professional
regarding your specific situation.
