Year-End Personal Finance Checklist - Roth Conversion

Critical Thinking Required

A Roth conversion refers to taking all or part of the balance of an existing traditional IRA (or 401(k), 403(b), 457(b), etc.) and moving it into a Roth IRA. The point is to pay the tax now so that the assets can grow tax-free for the rest of your life. One of the myths we frequently hear from people refusing to do a Roth conversion is that: I will be in a lower tax bracket when I'm retired and I will pay my taxes then. Dan and Tim discussed it and explained why this may or may not apply to you. In addition, if you are lucky enough to have other assets for your retirement, you may also want to consider your children's earning potential to know if a Roth conversion makes sense when they inherit your assets. Overall, as with most financial tools, there is no absolute good or bad, only if it suits your situation or not. Talk to your advisor and see if a Roth conversion is beneficial to you!