top of page
Roth Conversions.jpg

Roth Conversions

Turning your 401(k) plan or traditional IRA into a Roth? Our advisors can execute your Roth conversion to ensure you get the maximum benefits.

6.png
1.png
4.png
3.png
8.png

Creating a retirement account allows for people to have a safety net for their future. 

 

However, there are different types of retirement accounts, and people could get various benefits depending on the one they pick. Some even decide to open more than one retirement account and manage both simultaneously to enjoy the benefits both accounts offer them. 

 

Regardless of that, people can’t manage the funds they have on one account the same way they would use them in the other since all individual retirement accounts (IRAs) have different rules. Therefore, many try transferring their funds from one account to the other if they need them for something specific. 

 

Anyone looking forward to sending the funds in another IRA to a Roth IRA can read this article to know more about the matter. 

 

A financial advisor can guide a person through the process, and the advisors at The Kelley Financial Group are available for clients in Pittsburgh looking forward to making Roth conversions.

What Is a Roth IRA?

Roth IRAs are individual retirement accounts that allow people to make after-tax contributions now, and then have tax and penalty-free income when they withdraw their funds. Getting tax-free income is something not many accounts do, so it’s not uncommon to see someone with a traditional IRA making Roth conversions. 

 

People often compare Roth IRAs to 401(k) accounts since both address taxes when people make contributions to them, but they are not the same. 401(k) retirement plans are pre-tax, and that means they reduce income before withdrawals. The take on this is they allow employees to have a tax break since contributions are withdrawn from employee paychecks. 

 

It’s not difficult to see they are different from Roth IRAs since what they do is help people who don’t need to use their retirement money for the time being get a qualified, tax-free income when they retire. 

80+ YEARS OF COMBINED EXPERIENCE

The Kelley Financial Group has years of experience in guiding businesses and individuals through complex financial matters.​

Why Do People Make Roth Conversions?

There are certain reasons that some people prefer going for Roth conversions rather than keeping their money in other IRAs, and the first of them is the tax-free income employees receive when they withdraw their funds. 

 

Nonetheless, this is not the only benefit Roth IRAs have to offer, and people make Roth conversions to take advantage of other benefits, too. Roth IRAs, for example, don’t give people the required minimum distributions to follow, so it’s easier for people looking for a flexible account to manage them.

 

Roth IRAs are also sometimes used as an estate planning tool thanks to the tax-free income these accounts give employees when they retire. Since they don’t have to worry about taxes when they have an accident or pass away, its often easier for their beneficiaries to get the assets the account holder wants to give them. 

 

Tax-free income also gives other advantages, such as tax diversification of retirement assets. It can be easier for someone who doesn’t know a lot about this matter to manage their taxable income due to how flexible Roth IRAs are tax-wise. However, it could help to have a financial expert at hand.

Who Wants to Make Roth Conversions?

Roth conversions are usually used by people who don’t need to withdraw their funds for at least five years, since that’s one of the requisites Roth IRAs have regarding withdrawals. Early withdrawals bring severe penalties to the account holder.  

 

Naturally, this system can be beneficial if employees are in the same tax bracket when they retire or at least in a higher one, so that’s something to consider before making Roth conversions or opening a Roth IRA in the first place. Additionally, they need to be able to pay conversion taxes without using retirement funds for it. 

Roth Conversion Rules 

There are some rules to Roth IRAs that also apply to conversions, and not knowing them could lead to serious mistakes along the process. These rules focus on when people can access tax-free income.

 

Employees, for example, need to be at least 59 years and a half old and have a Roth IRA account active for the last five years before making any withdrawals. They can also get tax-free withdrawals if they are disabled or if beneficiaries take funds from the account due to the account holder’s death. 

 

There’s also a first-time homebuyer exception for people to make tax-free early withdrawals, but it’s not that common to see that exception being made. 

 

Regardless of the reason for clients making Roth conversions, The Kelley Financial Group can help them throughout the process.

 

It’s also worth noting everyone with a Roth IRA is eligible for Roth conversions. 

How to Make Roth Conversions 

People first need to have a Roth IRA to make Roth conversions, so the first step to make a conversion would be to create a Roth IRA.  

 

After that, employees need to make a conversion request and fill out all the paperwork needed for the matter. 

Conclusion - Who to Hire for Roth Conversions

Making Roth conversions can be made simpler with the help of The Kelley Financial Group. Their professionals can help the employee handle all the paperwork and account management.

 

This company also helps people pursue their financial goals by guiding them through financial decisions and budget analysis.

 

Anyone looking forward to working with The Kelley Financial Group can call to schedule a consultation! 


 

This material was prepared for The Kelley Financial Group’s use.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. 

 

The Kelly Financial Group and LPL Financial do not offer tax or legal advice or services. We suggest that you discuss your specific situation with a qualified tax or legal advisor. 

 

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Building Your Financial Future

bottom of page