Roth IRA Conversion


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.

BREAKING DOWN '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.

  1. In-Service Withdrawal

    A withdrawal made from a qualified plan account before the holder ...
  2. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  3. IRA Adoption Agreement And Plan ...

    A contract between the owner of an individual retirement account ...
  4. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  5. Savings Incentive Match Plan For ...

    A retirement plan that may be established by employers, including ...
  6. Non-Qualified Distribution

    1) A distribution from a Roth IRA that occurs before the Roth ...
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  1. How do I roll over a Simple IRA to a Roth IRA?

    If you leave your job and a Simple IRA behind, you have the option to roll over the Simple IRA balance to a Traditional IRA, ... Read Full Answer >>
  2. What is the Roth IRA 5 year rule?

    The Roth IRA five-year rule usually refers to the penalties incurred for withdrawing from a Roth IRA before five tax years ... Read Full Answer >>
  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, ... Read Full Answer >>
  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 ... Read Full Answer >>
  5. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  6. Who can make catch-up contributions?

    Most common retirement plans such as 401(k) and 403(b) plans, as well as individual retirement accounts (IRAs) allow you ... Read Full Answer >>

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