FAQ – Individual Retirement Accounts

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What are the pros and cons of rolling over an IRA to a Roth IRA?

A Roth IRA offers a number of advantages over a traditional IRA:

  • There are tax-free withdrawals of earnings if you hold the account for at least five years and are at least age 59 1/2 when you start distributions.
  • You can take out contributions tax-free at any time.
  • There are no required minimum distributions during the original account holder's lifetime.
  • Beneficiaries of a Roth IRA can take tax-free distributions as long as they meet the IRS's timeline.

That said, it may not be advantageous to roll over an IRA to a Roth IRA in the following circumstances:

  • if you don't have money available to pay the tax bill on the conversion without taking it out of the traditional IRA balance,
  • if you are nearing retirement, will need to start taking withdrawals soon and will not likely earn enough on the Roth IRA to make up for the taxes paid or
  • if you are in a high tax bracket now and expect to be in a lower bracket once you retire.

Talk with a tax advisor or financial professional before making the decision.

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