Roth vs. Traditional IRA

Should I Convert?

When you convert a traditional IRA to a Roth IRA, the amount converted, less your basis,* is recognized as income and tax is due in the year converted. On conversions made before December 1, 1998, the the tax on the conversion can be spread over 4 years provided your adjusted gross income (determined without regard to amounts included in income due to the conversion) is under $100,000.

A conversion may make sense if:

• You don't plan to tap into your IRA when you retire. Perhaps you want to leave it to your children. Unlike traditional IRAs there are no minimum distribution requirements at 70 1/2 years of age.
• When you retire you don't expect your income tax bracket to drop significantly.
• You won't be retiring for many years and you money has time to grow and compound.

The new tax rules can be complex. Before choosing an IRA or making changes to your investment strategy, consult a qualified tax advisor.

*Your basis in your traditional IRA is equal to the amount of any non-deductible contributions made to the traditional IRA.

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