Is Now the Right Time to Convert to a Roth IRA?

Thinking about converting to a Roth IRA? For some, there’s never been a better time to make the switch, says financial expert and blogger David John Marotta.

On his blog Marotta on Money, he points out that Bush-era tax cuts of 2001 and 2003 are set to expire at the end of 2012. When they do, some people will enter a higher tax bracket, making these months their last chance to pay that lower tax rate when converting a traditional IRA to a Roth IRA.

Of course, converting to a Roth IRA wouldn’t benefit everyone. How a Roth IRA will impact your retirement funds depends on factors like your annual income, your age and the amount of money in your IRA. One way you can figure out if converting is right for you is by using an online Roth IRA calculator.

Say you do convert to a Roth IRA, but then decide it’s not the best financial strategy for your retirement. You can move that money back to a traditional IRA. This is called a Roth recharacterization. If you do move back to a traditional IRA, just make sure to do so before you file your taxes, in order to recoup the taxes paid on the initial conversion.

Of course, it’s always best to talk to a trusted financial planner before making any sort of major retirement-related decision. This way you can be sure that you’re making the financial moves that are right for you.

Will you convert to a Roth IRA in the coming months? What other steps are you taking this year to prepare for retirement?

External Link Image Label Links to non-Ally websites

We provide links to third-party websites for your convenience. Although we provide a link, Ally Financial is not responsible, nor can we guarantee their products, services, or information. We suggest you review their online policy and security practices to learn about this third party and how they handle consumer information.

Leave A Comment