What is a Roth conversion?

A Roth conversion is the process of moving assets from a traditional IRA or 401(k) into a Roth account, which requires paying taxes on the converted amount in exchange for future tax-free growth.

What is the five-year rule for Roth conversions?

Converted funds generally must stay in the Roth account for a five-year period to avoid penalties on withdrawals, regardless of the account holder's age.

When is the best time to consider a Roth conversion?

Because conversions are taxed as ordinary income, performing them during years of lower income may help minimize the total tax liability.

Five Essential Facts About Roth Conversions

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