Weekend Reading: Considering a Roth IRA Conversion? 6 Reasons It Makes Sense

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

Roth IRAs offer an easy way to upgrade your tax efficiency. Unlike a traditional IRA, Roth IRA withdrawals are tax-free after five years. There is no income limit in converting IRA savings to a Roth; however, you do pay taxes on the amount moved.


In that light, here are four of the six instances when converting is worth your consideration:

📌 If you could be in a higher tax bracket in retirement: Leverage today’s low tax rate environment and pay taxes now (or before you begin taking RMDs), when you’re in a lower tax bracket.

📌 If your traditional IRA is not needed for retirement expenses: Instead of waiting to withdraw from a traditional IRA later in retirement (and paying higher taxes), convert to a Roth IRA before you need the funds, and again, reap today’s low tax rates.

📌 Before Medicare eligibility and taking Social Security: If your income could reach or exceed certain income thresholds, you can utilize a Roth IRA to help avoid extra Medicare premium charges, a Medicare surtax or higher taxes on Social Security benefits.

📌 When the market is down: You can convert shares at a lower cost with your potential future gain being tax-free. Your future tax rate versus your current tax rate isn’t the only consideration for you to make when evaluating a Roth conversion.