Key Takeaways

• Consider the tradeoffs: A Roth conversion means trading a tax bill today for potential tax‑free withdrawals later.
• Remember key rules: Conversions are nonreversible, generally taxable, subject to the five‑year rule for converted amounts if you’re under 59½ and must be completed by Dec. 31 of the current year.
• Assess your position: Can you afford to fund the Roth IRA and pay the taxes on the conversion from another source?
• Consider timing: Determine whether you can convert earlier in market downturns and spread conversions over several years to manage your tax bracket, while paying the tax out of pocket to keep more invested.
• Why Edward Jones: Your Edward Jones advisor can help you compare conversion scenarios and offer guidance based on your financial position and retirement timeline.

What is a Roth IRA conversion?

A Roth IRA conversion involves moving money from a traditional IRA to a Roth IRA. With a Roth conversion, you pay taxes now to convert your funds, but you can gain access to qualified tax-free distributions in the future. Because Roth IRAs don’t require minimum withdrawals during your lifetime, your money can keep compounding tax‑free for longer..

Why should you consider a Roth IRA conversion?

A Roth IRA makes sense when you expect to be part of a higher tax bracket in the future. Benefits include:

• Tax-free income when you make qualified withdrawals, giving you more control over your tax bill in retirement
• Potentially lower taxes if your current tax rate is lower than your expected tax rate in retirement
• The ability to access contributions tax- and penalty-free before retirement
• No required minimum distributions while the original account holder is alive, allowing your assets to grow tax free over a longer period
• A tax-free asset for your heirs 

What rules and deadlines should you keep in mind?

Before converting your IRA, you should be aware of some important considerations for taxes, timing and distributions.

• A Roth IRA conversion is nonreversible. Once you convert funds from a traditional IRA, you can’t undo the transaction. Make sure you’re aware of the tax consequences and financial impacts before you convert.
• A Roth IRA conversion is generally a taxable event. You pay taxes now to convert pre-tax assets, but you can gain access to tax-free distributions in retirement.
• A 10% penalty may apply if you distribute the converted assets early. If you’re under 59½ and distribute the converted assets from your Roth IRA before meeting the five-year holding period requirement, the distribution will be subject to a 10% tax penalty unless you qualify for a penalty exception. The five-year holding period requirement applies separately to each Roth conversion you make.
• The deadline for a conversion to count for a given year is Dec. 31. It is not the tax deadline, like it is for an IRA contribution. Revisit the basics of an IRA

Should you consider a Roth IRA conversion?

If you’re thinking about a Roth IRA conversion, your Edward Jones advisor can help you consider your current financial needs, the size of your traditional retirement accounts and your present and projected tax bracket.

In general, you may be a good candidate for a Roth IRA conversion if the following apply:

• You don't need access to the funds for five years;
• You can pay any related taxes from sources other than the conversion;
• You hold a sizable amount of assets in traditional retirement accounts but want access to tax-free assets or to reduce RMDs in the future.
• You expect your future tax bracket to be higher than it currently is.
• You expect your taxable income to be high in retirement (in one of the top four federal tax brackets).

If you meet these criteria, you may benefit from a Roth IRA conversion.

Are there additional considerations for a Roth IRA conversion?

If you're interested in a Roth IRA conversion, there are some additional considerations you should be aware of to help maximize the benefits:

• While it’s generally a good idea to wait until year-end to complete a Roth conversion, consider converting earlier in the year if markets are down, especially if you have a good sense of your taxable income for the year.
• Because you’re not limited in the number of times you can complete a Roth conversion, you may benefit from converting smaller amounts over time. By making Roth conversions in smaller pieces, you can avoid concentrating the tax bill in any one year. And if you have years when your income is lower, you can use those years to avoid a bump in your tax bracket.
• Aim to pay taxes related to the conversion out of pocket rather than having them withheld. Otherwise, you’ll end up with less converted and could owe a penalty on the withheld amount.

How can Edward Jones help?

While a Roth IRA conversion, can provide tax-free income after you retire, many variables (such as timing and the size or number of conversions you make) could hinder your ability to reap the full benefits of this strategy. Alongside your tax professional, your Edward Jones financial advisor can help you decide how best to take advantage of a Roth IRA conversion.

Frequently Asked Questions

How can I make a Roth IRA conversion, and which firms can help?

To make a Roth conversion, you typically open or use an existing Roth IRA, choose the amount to convert from your traditional IRA and authorize the transfer. Many financial institutions, including Edward Jones, can assist with the paperwork and coordination.

How can I find a provider who can help with IRA recharacterization and deadline guidance?

Under current tax law, you can’t recharacterize, or undo, a Roth conversion completed after 2017. Some recharacterization options still apply to contributions (for example, moving a current‑year Roth IRA contribution to a traditional IRA), but not to conversions. Your Edward Jones advisor can explain what’s allowed today and clarify key deadlines for contributions and conversions.

How do I perform a Roth conversion and what are the tax consequences?

First, you select the amount and complete the conversion paperwork. Your financial services provider then moves assets from your traditional IRA to your Roth IRA. The converted amount is generally taxable as ordinary income in the year of conversion. If you withdraw converted amounts within five years and you’re under 59½, a 10% penalty may apply unless you qualify for an exception. We recommend coordinating with your tax professional to understand your specific tax impact.

Should I consider a Roth conversion now or later for tax planning?

Consider converting in years when your taxable income is lower, when markets are down or before events that might push you into a higher future tax bracket, such as retirement income, future required withdrawals from traditional accounts or expiring tax provisions. An Edward Jones financial advisor can model now vs. later scenarios so you can choose the timing that best supports your goals.

Where can I get help converting a traditional IRA to a Roth with tax planning?

An Edward Jones financial advisor can coordinate with your tax professional to size, schedule and complete a Roth IRA conversion.