Reasons to Convert an IRA to a Roth IRA

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    No Tax on Earnings

    • The most advantageous feature of a Roth retirement account over an IRA is the tax treatment of accrued earnings, according to certified financial planner Denise Appleby. You pay zero federal tax as long as you have had your account for at least five years and are age 59½ or older. People younger than 59½ can still avoid paying the 10-percent early-withdrawal tax penalty if their Roth account is five years old and they use those disbursements toward the purchase or rebuilding of a first home ($10,000 limit), for college tuition fees or as income if they become disabled.

    No Age Limits

    • Unlike a traditional IRA, which restricts you from opening an account or making contributions after age 70½, you may open a Roth IRA at any age and contribute the maximum allowable amount per tax year as long as you live. As of 2010, individuals under age 50 may contribute up to $5,000 per year. For people older than 50, contributions can increase to $6,000 per tax year, according to IRS rules.

    No Required Distributions

    • With Roth accounts, the Internal Revenue Service does not require you make withdrawals after reaching age 70½ as with IRAs. These minimum required distributions--which are set by the IRS every year--not only reduce your IRA but are taxed as income. Switching over to a Roth allows you to leave the money in your account to grow or be passed on to your heirs--tax-free.


    • If your income exceeds certain limits, you may not qualify to contribute to a Roth IRA. Check with the IRS under income limitations for Roth accounts.

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