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Is a Roth Conversion Right for Me?

June 3rd, 2019 | Written by

Is a Roth Conversion Right for Me?If you’re considering converting a Traditional IRA, SEP IRA, Simple IRA, or a 401(k) to a Roth IRA, you may be wondering, “Is a Roth conversion right for me?” First, it’s important to understand the main difference between a Roth and a Traditional IRA.  A Roth IRA is funded with after-tax dollars and qualified distributions are tax-free.  Unlike traditional IRAs, Roth IRAs are not subject to required minimum distributions (RMDs).  Unfortunately, only individuals who meet the Roth IRA income limits can contribute to a Roth.  You can work around the income limit by doing a Roth conversion IF it makes sense for your unique financial situation.

Income and Contribution Limits for Roth IRAs

Filing StatusModified Adjusted Gross Income (MAGI)Contribution Limit



Single, head of household, or married filing separately (if you did not live with your spouse at any time during the year)

< $122,000$6,000 ($7,000 if 50 or older)
≥ $122,000 but < $137,000Partial contribution (phase-out range)
≥ $137,000Not eligible to contribute

Married filing jointly or qualified widow(er)

< $193,000$6,000 ($7,000 if 50 or older)
≥ $193,000 but < $203,000Partial contribution (phase-out range)
≥ $203,000Not eligible to contribute

Married filing separately (if you lived with your spouse at any time during the year)

< $10,000Partial contribution (phase-out range)
≥ $10,000Not eligible to contribute


To qualify for a Roth conversion, there is no income limit or tax penalties if the funds are moved within a 60-day window. The amount that is converted is added to your individual income and is taxed at your regular income tax rate.

Is a Roth conversation right for you?

Do you believe you will be in a higher tax bracket when you retire?

Compare your current tax bracket to your future tax bracket in retirement. If you believe you will be in a higher tax bracket in retirement, then a Roth conversion may benefit you as you will pay less taxes in the long run.  The money in your Roth IRA will grow tax-free and your withdrawals won’t be taxed in retirement.  In addition, if you convert to a Roth IRA, you will not be required to take required minimum distributions (RMDs) when you turn age 70 ½.

Do you want to maximize your estate for your beneficiaries?

If you don’t need to tap into your retirement funds and prefer to leave them to your heirs, then a Roth conversion may allow your savings to grow more.  Your beneficiaries will also benefit from tax-free withdrawals for their lifetime. It’s important to note that there is a five-year holding period for your beneficiaries to make a tax-free withdrawal. If the five-year holding period is not met, the earnings are subject to tax.

Where do you plan to live?

If you plan to move in retirement to a state with a higher income tax rate, then it may make sense to convert some, or all, of your IRA funds into a Roth IRA before you move.  Again, assuming the five-year holding period is met, Roth withdrawals are federal income tax-free after age 59 1/2.  If you plan to live in a state that has no income state tax, such as Florida, Texas, or South Dakota, then a Roth conversion may not make sense for you.

A Roth conversion may be a good idea for your unique retirement plan. Talk with your Financial Advisor to determine if a Roth conversion is right for you or send us a note in the box below!

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    This information is not intended to be used as the only bases for investment decisions, nor should it be constructed as advice designed to meet your particular needs. You are advised to seek the advice of your financial advisor prior to making any decision based on any specific information contained herein.
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