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.

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RELATED FAQS
  1. I want to take advantage of retirement savings. Can I contribute $6K to a Roth IRA, ...

  2. Can I rollover a SIMPLE IRA to a Roth IRA tax free?

    I am currently employed and my SIMPLE IRA has been in place for about 15 years. Can it be  Read Answer >>
  3. Can you make regular monthly contributions to a backdoor Roth IRA?

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    If your modified adjusted gross income (MAGI) is $100,000 or less and you are not married filing separately, you may initiate ... Read Answer >>
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