Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
Dear Tax Talk,
When is it wise to convert traditional IRAs to Roth IRAs? I am retired and do some estate planning. Converting now will put me into the 25 percent tax bracket, but I will also be in the 25 percent bracket when I start taking RMDs (required minimum distributions). My question is: Is it wise to pay tax now and pass tax-free Roth IRAs on to my children? Or when is it wise to convert IRAs to Roths?
— Ernie
Dear Ernie,
I am never a fan of paying more tax on purpose. The Roth conversion is an oddity as it exists to make people pay more tax now in exchange for a future promise that you will not have to pay tax. Of course, the tax laws are always changing and that promise, while currently the case, may be modified in the future.
A Roth IRA conversion involves rolling money out of a traditional IRA into a Roth IRA and including the transfer in your income for the year. Your adjusted gross income must be less than $100,000 for the year of transfer — which is a good thing; otherwise you may pay too much tax.
Hence, the transfer makes sense in a year in which you don’t have any income and may lose deductions otherwise. It might also makes sense in a year when your marginal rate will be less than the rate in the year when you are required to take minimum distributions (i.e., after age 70½). You say that you are not in a lower rate currently, but if you could move some investments around so that in a year or so you fall into a lower rate, it may be worth revisiting the conversion.
The Internet is loaded with information and calculators for determining when it may make sense to convert to a Roth IRA. I suggest you look around a little bit and also sit down with a good estate planner for some personal attention.
Share