Roth Conversion (Investments & Retirement) - Definition, Examples, Advice | Bolder Money

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Definition

The process of moving money from a Traditional IRA or 401K into a Roth IRA so that future withdrawals can be tax-free.

What to consider

Plan for a higher taxable income in the conversion year.
Consider spreading out conversions to ease the tax hit.
Focus on the long-term benefit of tax-free growth in retirement.

Real world scenarios

Hoping for future tax-free withdrawals, Emily converts a portion of her Traditional IRA to a Roth IRA, accepting taxes now to potentially save more later.
Leo performs a Roth conversion in a year his income is lower, minimizing the tax impact on the converted amount.
Gabriel plans incremental conversions over several years, preventing a big tax spike in any single year.

Related terms

Investments & Retirement

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