Investment Strategies

Don’t Have a Roth IRA? It’s Never Too Late to Convert


by Alli Thomas

Nov 27, 2018

We often talk about Roth IRAs – and for good reason, as they are a great tool for tax-free earnings growth.


Roth IRAs are primarily touted as savings vehicles for lower-income workers with a long investment horizon that expect to be in a higher tax bracket in retirement. However, since assets in a Roth IRA are not subject to probate and can be passed on to heirs tax-free, wealthier investors may also benefit.


The Roth IRA didn’t exist before 1998. If you’re already retired – and especially if you’re over age 70 ½ – chances are good that you may not even have one. But that doesn’t mean you can’t take advantage of the unique features of this kind of IRA. A backdoor conversion allows investors with traditional pretax IRAs to convert those funds to a Roth.


What to Consider Before a Roth IRA Conversion If You’re Over 70 1/2


If you’re over age 70 ½ and are thinking of doing a Roth IRA conversion, here are a few things to consider:


  1. Your future tax rates. If you think your tax rate will rise in the future, it may be worth it to convert your traditional IRA to a Roth IRA and pay those taxes upfront now.
  2. Your beneficiary’s future tax rates. If your beneficiary expects to be in a higher tax bracket at the time he or she inherits your Roth IRA assets, you may want to consider converting your traditional IRA to a Roth IRA now, so that he or she can inherit your assets tax-free. You’ll foot the tax bill, so this is something that you’ll want to carefully consider before making any decisions. If your beneficiary expects to be a in a lower tax bracket at the time of inheritance, then it may make more sense not to convert your traditional IRA, and let your beneficiary handle paying the taxes at the time of the inheritance.
  3. When you’ll need to access these funds. If you expect to live off your traditional IRA savings in the near term, then you may want to hold off on that Roth conversion.


In any event, the IRS requires those who are subject to RMD rules to first take the RMD before any amount of your traditional IRA can be converted to a Roth IRA.


Ready to convert? Sign up for a complimentary conversation with one of our financial advisors and let us walk you through the process.

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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2 Responses

  1. Avatar Pat Ward says:

    Who can I speak to about these options privately.