Roth IRA Conversion

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DEFINITION of 'Roth IRA Conversion'

A reportable movement of assets from a Traditional, SEP or SIMPLE IRA to a Roth IRA, which can be subject to taxes. A Roth IRA conversion can be advantageous for individuals with large traditional IRA accounts who expect their future tax bills to stay at the same level or grow at the time they plan to start withdrawing from their tax-advantaged account, as a Roth IRA allows for tax-free withdrawals of qualified distributions.

INVESTOPEDIA EXPLAINS 'Roth IRA Conversion'

A conversion may be accomplished by a rollover of assets directly between the trustees of the Traditional and Roth IRAs, or by the IRA owner distributing the assets from the Traditional, SEP or SIMPLE IRA and rolling over the amount to the Roth IRA within 60 days of receiving the distributed amount. It is recommended that any such conversions be done following a meeting with a financial planner or personal tax professional, as there may be major tax implications if not done appropriately.

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  2. Qualified Distribution

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  3. Individual Retirement Account - ...

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  6. Non-Qualified Distribution

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RELATED FAQS
  1. How do I roll over a Simple IRA to a Roth IRA?

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  2. What is the Roth IRA 5 year rule?

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  3. I am rolling my 401(k) into an IRA. After a year, can I convert this amount to a ...

    There is no provision in the tax law that would allow anyone to convert taxable funds and treat it as a tax-free transaction, ...
  4. Is my non-qualified Roth IRA distribution subject to taxes or early distribution ...

    The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution ...
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