Roth Conversions

What is a Roth IRA?

A special retirement account where you pay taxes on money going into your account, and then all future withdrawals are tax-free.

It is important to note there are:

  • Income limits for contributions (go to www.irs.gov or give our office a call)
  • A Roth IRA 5-year rule
  • NO Required Minimum Distributions

What is a Roth Conversion?

An IRA conversion is simply changing the account classification from a Traditional IRA to a Roth IRA. Beginning in 2010, the federal government began allowing investors to convert their traditional IRAs into Roth IRAs, regardless of the amount of income they earned.

Roth Conversion Pros:

Tax-Free Growth/Potential for Lower Taxes in the Future

  • Your account can grow, and you do not receive a 1099 each year.  In addition when you take the money out AFTER age 59.5 you do not pay taxes.


No age limit

  • You can put money in your account for as many years as you want, as long as you have earned income that qualifies.

No employer-plan restrictions

  • It doesn’t matter if you’re covered by an employer’s retirement plan, such as a 401(k) or 403(b). As long as you don’t exceed the IRS’s income limits, you can still contribute the maximum annual amount to a Roth IRA.
  • For the 2023, that’s $6,500, or $7,500 if you’re age 50 or older. For 2024, its $7,000 or $8,000 if you are over 50.

No taxes for your beneficiaries

  • You can pass your Roth IRA on to your beneficiaries, and their withdrawals will be tax-free. **

Roth Conversion Cons:

  • You pay tax on the conversion when you do it—and it could be substantial.
  • You may not benefit if your tax rate is lower in the future.
  • You must wait five years to take tax-free withdrawals, even if you’re already age 59½.
  • Figuring taxes can be complicated if you have other traditional, SEP or SIMPLE IRAs you’re not converting.

 The 5-year holding period for Roth IRAs starts on the earliest of: (1) the date you first contributed directly to the IRA, (2) the date you rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA, or (3) the date you converted a traditional IRA to the Roth IRA. If you’re under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you’re required to keep track of the 5-year holding period for each conversion separately.

**If you inherit a Roth IRA, you must take RMDs, but they’re tax-free as long as the original account owner held the account for at least 5 years. This is meant for educational purposes only and should not be considered advice or a recommendation to take a particular course of action. Always consult with a financial professional regarding your personal situation before making any financial decisions. 

You may wish to consult a tax advisor about your situation.


Thinking about a Roth conversion? Schedule a complimentary consultation to review your financial goals and discuss retirement strategies including converting your Roth.