Roth IRA conversions

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Is a Roth conversion the right strategy for you?

A Roth conversion is a strategy that allows you to pay income taxes on some or all of your retirement assets today, rather than when you withdraw them in retirement. It's done by converting a traditional IRA to a Roth IRA, and, with few exceptions, anyone is eligible to convert regardless of age or income.

What are the benefits of a Roth IRA conversion?

  • Unlike with a traditional IRA, you're generally not taxed when you withdraw contributions and earnings from your Roth IRA – as long as your Roth IRA is at least five years old and you're 59 ½ or older. If not, the earnings portion of the withdrawal may be subject to taxes and a 10% penalty, unless an exception applies.
  • You may pay lower taxes if your current tax rate is lower than your expected tax rate in retirement.
  • Diversifying your retirement assets by tax treatment may give you greater flexibility to manage your taxable income in retirement, so you don't have to worry as much about future income tax rates.
  • No minimum distributions (RMDs) are required while the original account holder is alive, allowing your assets to grow tax-deferred over a longer period.
  • You may be able to create a tax-free legacy for your heirs.

Roth IRA rules and limits

Before converting your IRA, there are important tax rules and considerations. If you do decide to convert to a Roth IRA, the taxes you'll owe for the conversion generally will be based on the value of the investments in your IRA at the time. Whatever amount you convert may be included as part of your taxable income in that year.

And remember: Converting a traditional IRA to a Roth IRA is not an all-or-nothing decision – converting a portion of your traditional IRA also is a strategy to consider.

Keep your end goal in mind when deciding to convert to a Roth. Consider these factors:

  • Will you be able to afford the taxes due?
  • What is your tax rate now, and what will it be in the future?
  • When do you need to make withdrawals?

How we can help

To determine if a Roth IRA conversion makes sense for you, an Edward Jones financial advisor can meet with you and your tax professional to explore the options.

Important Information:

Edward Jones, its employees and financial advisors cannot provide tax advice. You should consult your qualified tax advisor regarding your situation.