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To Convert or Not to Convert Your IRA? (#1000-378)

As the debate over the value of Roth individual retirement accounts (IRAs) versus traditional IRAs continues, I thought it might be helpful to outline a few of the pros and cons of converting from a traditional to a Roth IRA.


  • A Roth IRA will grow tax free instead of tax deferred.
  • There are no income taxes on any retirement distributions, as long as the distribution is qualified.
  • There are no required minimum distributions at age 70 1/2.


  • You must pay income taxes on amounts rolled over if they would be taxable when withdrawn.
  • The income taxes must be paid in the year of the conversion.
  • IRA conversion may put you into a higher tax bracket or cause you to lose some tax credits, deductions, or exemptions.
  • If the income tax is paid by withholding funds from the converted IRA, the amount withdrawn will be subject to income tax and the 10% federal penalty if you’re under the age of 59 1/2.

To convert a traditional IRA to a Roth IRA, you or you and your spouse must have an adjusted gross income of less than $100,000 in the year of conversion. As a general rule, the longer you have until retirement, the more sense a conversion to a Roth IRA makes.

If you have any questions or would like to discuss the possibility of converting your IRAs, please give me a call.

What Is a Roth IRA? (#0100-331)

How much do you know about the Roth individual retirement account (IRA)? Here are a few facts you should know:

  • Individuals can invest up to $2,000 per year ($4,000 for couples), provided the amount invested does not exceed earned income.
  • Contributions are not tax deductible, so they are made from after-tax dollars.
  • Contributions can be withdrawn free of taxes and penalties at any age.
  • Earnings can be withdrawn tax free after age 59 1/2, provided the account is held at least five tax years.
  • Penalty tax-free withdrawal of earnings before age 59 1/2may be permitted in cases of death, disability, or to pay qualified higher-education expenses.
  • Mandatory distributions are not required at age 70 1/2or over.
  • Contributions can be made by single taxpayers with adjusted gross income (AGI) less than $95,000 and married taxpayers filing jointly with AGI less than $150,000. Contributions are phased out for single taxpayers with AGI between $95,000 and $110,000 and for married taxpayers with AGI between $150,000 and $160,000.
  • You can still contribute to a Roth IRA after age 70 1/2, provided you have earned income and your AGI is not above the phase-out range.
  • Conversions from a traditional IRA to a Roth IRA are permitted for taxpayers with AGI of no more than $100,000 in the year of the conversion.

If you think a Roth IRA may be a good retirement savings tool for you, but would like more information, please give me a call.