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Conversion to a Roth IRA

With a conversion, you pay federal income taxes now on the conversion amount, but none on any future earnings as long as when withdrawals are taken, the five-year aging period has been met and you are age 59½ or over, disabled, or deceased.

Employer-Sponsored Plan Conversions to a Roth IRA

Conversion rollovers from employer-sponsored plans, such as qualified plans and 403(b) plans, to a Roth IRA are permitted.  Individuals are permitted to rollover amounts from an eligible retirement plan and convert them to a Roth IRA under The Worker, Retiree, and Employer Recovery Act of 2008 (“WRERA”) regardless of their modified adjusted gross income or filing status.

Conversion of Traditional IRA to a Roth IRA

The Roth IRA conversion rules in 2013 are the same as the 2012 rules, meaning anyone can convert a 401k or a Traditional IRA to a Roth IRA regardless of income.

In years past, the IRS barred high income earners from making Roth IRA conversions. But in 2010, Congress allowed the $100,000 income limit on Roth IRA conversions to disappear. For higher wage earners, this is a prime opportunity to convert money into the Roth IRA to allow your money to have tax-free growth at retirement. 

Any taxable income resulting from a conversion will be includable on your federal income tax return for the year of the conversion.  If you have decided that the Roth IRA may be suitable for you, you can convert your Traditional IRA into a Roth IRA.  

The information provided herein is for reference only and does not purport to give tax or legal advice.  Please consult your tax or legal adviser for more information regarding this material.

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