Factors To Consider When Deciding Whether to Convert an IRA to a Roth IRA AccountWritten by: Steven J. Fromm Whether to convert an IRA to a Roth IRA involves many factors. In many cases, it is difficult to know with certainty what is the best course of action. The following are some factors that may aid in this decision.
Consider ConvertingYou should consider converting to a Roth IRA if the following apply to your situation: - You expect your tax rate to be higher in retirement
- You do not think you will need the money for living expenses
- Your investment horizon is long enough to benefit from the tax-free growth of a Roth IRA
- You can afford to pay taxes on the conversion using separate funds.
Consider Not ConvertingYou should probably not convert your IRA in the following situations: You expect a lower income tax rate at retirement You will need the funds for living expenses. You lack separate funds to pay taxes. You plan to donate the entire IRA to charity. You may want to donate only a portion, so you could split the IRA into the Roth and give the balance to charity.
Run Projections and Get Professional GuidanceThe above are just some of the issues to consider here. In addition, you should meet with a tax attorney or your tax accountant to run various income, cash flow and tax projections to determine with more certainty which option to consider. Copyright © 2011 - Steven J. Fromm & Associates, P.C., 1420 Walnut Street, Suite 300, Philadelphia, PA 19102. All rights reserved. “Steve is an excellent attorney who has provided help for my family personally for business, tax, and other services for many years. He is extremely knowledgeable and thorough, and is extremely good at explaining legal concepts to me in clear terms understandable to a non-attorney. It is difficult to pick only three attributes above, since Steve’s work meets most if not all of the attributes above.” Jonathan Weiss, November 11, 2008 | 
