A Roth conversion means moving money from a Traditional IRA to a Roth IRA and paying income tax today in exchange for tax-free growth and withdrawals in the future. While paying tax upfront may feel counterintuitive, the long-term benefits can be significant.
Roth conversions can be especially effective during market downturns, when account values are temporarily lower and the tax cost of converting is reduced. They can also help manage future required minimum distributions and smooth taxable income in retirement.
One important detail: whenever possible, paying the conversion tax from outside funds—rather than from the IRA itself—allows the full amount to remain invested and grow tax-free.
A Roth conversion is rarely an all-or-nothing decision. When modeled carefully and coordinated with your broader tax and retirement plan, they can be a powerful long-term strategy.
Wondering how a Roth conversion could work for you? Contact us today to schedule a complimentary Q&A with one of our team members.
