In the event that you're into your retirement, you might wonder if you should consummate an IRA rollover to Roth IRA. It's now possible anytime without restrictions as to age or income. Let's consider the circumstances for converting and some causes of doing so.
Traditional IRA rollover to Roth IRA Conversion Conditions :
- You could be any age - past 70½ can be permitted
- You can have any amount of income (limitation was removed by IRS)
- You can already have commenced taking IRA RMDs from your traditional IRA and still convert.
- You need to have non-IRA cash to pay the conversion tax to make the conversion useful
Reasons to complete an IRA rollover to a Roth IRA:
- No RMDs are needed from a Roth IRA by the account owner of his spousal beneficiary . But with a traditional IRA you need to take required minimum distributions (RMDs). And RMDs produce unnecessary taxes for you.
- You decided to leave the IRA for your non-spouse beneficiary nevertheless taking RMDs may substantially lessen the account value. And your IRA beneficiary will need to also pay tax on his RMDs too.
- You dread that income tax rates increase in the future so withdrawals via traditional IRAs in the future - with either you or your beneficiary - can undercut the benefit of storing wealth within your traditional IRA.
- Your income is lower in your retirement years, therefore completing an IRA roll-over to Roth IRA will result in less 'conversion' tax.
IRA rollover to Roth IRA has great benefits not only for you and your spouse but also your beneficiary.
Lose a Fortune on Your 401k Rollover
If you do not do any of these correctly:
- Opt for a distribution rather than direct transfer
- Rollover company stock to an IRA
- Choose to rollover to a Roth IRA
- Rollover to your new employer’s 401k
- Rollover post-tax contributions