What is a Roth conversion and when does it make sense?
A Roth conversion means moving money from a Traditional IRA or 401(k) into a Roth IRA. You pay ordinary income tax on the converted amount in the year of conversion, but all future growth and qualified withdrawals are permanently tax-free. Conversions make the most sense when: (1) You have a temporary low-income year (e.g., between jobs, early retirement). (2) Tax rates are currently low relative to your expected future rates. (3) You want to reduce future Required Minimum Distributions (RMDs). (4) You have funds to pay the tax from a non-retirement account (paying the tax from outside the account preserves more tax-free growth). Use the Roth Conversion Analyzer at wealthserene.com/tools/roth-conversion to model the long-term benefit.
Educational disclaimer. Everything on WealthSerene.com is educational and is not investment advice. Projections and calculations are illustrative; actual results depend on market conditions, your situation and factors outside this tool’s scope. For a decision specific to your situation, consult a qualified financial professional. View full disclosures