Retirement Investment

Roth IRA Conversion Info for Beginners: A Quick Overview of the Steps Involved

If you want to make more out of your savings, and you have a traditional IRA account, then taking that money – or at least part of it – and converting it into a Roth account might be a good move. It’s not for everyone, however. How do you know if Roth IRA conversion is right for you?

And what about the steps involved? In general, here is how the process goes:

• Make sure you actually have adequate funds in a traditional IRA account. If you don’t, open one and fund it.

• If your traditional account is new, you’ll need to first pay taxes on the IRA contributions / gains. This is because you’ll post-tax dollars to put into the Roth IRA.

• If you deduct your traditional IRA contribution, give the tax deduction back at some point. Those contributions and any gains you make through investments will be added to the taxable income later when you do your tax returns.

• When the timing is right, do the Roth IRA conversion. If you’re unsure when the ideal time would be for you, there are calculators online to help you, as well as financial advisors and robo-advisors.

Roth IRA Conversion Paperwork

There should be an IRA administrator who will give you instructions and help you prepare the paperwork. You don’t want to try and do everything by yourself, as you could wind up making mistakes with the IRS. The conversion should be done in a way that will allow you to stay in line with the IRS rules.

After you’ve successfully established a Roth IRA account, you won’t have to worry about paying taxes on withdrawals (so long as you meet the requirements).

Another benefit of converting your money into a Roth account is that there will be no required minimum distributions, which the IRS mandates with the traditional IRAs at the age of 72.

There are certain requirements and guidelines you’ll have to meet in order to truly be tax-free with withdrawals with a Roth. For instance, if any withdrawals you make are more than the contributions you have made in total, and you are under the age of 59 ½, you still might be subject to a penalty.

For a better understanding of how the whole Roth IRA conversion process works, and to help you to decide if it truly is a beneficial option for you, it’s best to check out the helpful resources and information offered by Rocket Dollar. This service has a HUGE knowledgebase and offers many helpful investment products and services.

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