Roth Conversions: What You Need To Know

by Lauren Beichner

Marketing Specialist

Member Tips

What’s all the buzz about Roth Conversions? 

When you retire and start taking income from your nest egg, you’ll want as much of that money to be tax free distributions, right?  Well, a helpful approach is to create a bucket that allows for tax-free distrbutions is through the Roth IRA.  Unfortunately, many Americans are looking at their retirement plan and realize they don’t have much in their Roth Bucket.  In this blog post we will discuss:

  • The Roth IRA basics like who can contribute to a Roth IRA and how much they can contribute in 2021.
  • Why it’s important to know the Roth IRA rules to maximize your distributions.
  • How to convert some or all of your Traditional IRA to a Roth IRA.
  • Are you a good candidate for a Roth conversion?

Is a Roth Conversion Right for You?

There are several reasons to consider a Roth conversion: 

  1. You cannot make contributions to a Roth IRA due to income limits and you don’t participate in an employer sponsored retirement plan that offers an after-tax “Roth” contribution option.
  2. If you decide to do a Roth conversion and you are in an unusually low income year due to a leave of absence or job change, you may be able to take advantage of this situation by completing the Roth conversion at this time, meaning the tax implications of the conversion would be lower than they would be in a typical income year.
  3. If you believe that tax laws could change or you may be in a higher tax bracket in the future, you might consider a Roth conversion.
  4. If you don’t think you will spend all of your IRA retirement assets in your lifetime and plan to pass them to your children or other non-spouse individual, you could consider a Roth conversion. Your IRA assets are subject to a Required Minimum Distribution at age 72 but Roth assets are not.
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