Paying for Your IRA Conversion to a Roth

If you have an IRA, making a conversion to a Roth IRA can be a good move. However, when you do this, you are going to have to pay taxes on the money that you convert. Here are a few things to consider about paying for your conversion from a traditional to a Roth IRA.

Taxes

When you convert from a traditional IRA to a Roth IRA, you are going to be changing tax situations with your retirement account. With a traditional IRA, you are going to fund the account with pretax dollars. By contrast, you fund a Roth IRA with money on which you have already paid taxes. This means that if you want to convert from a traditional IRA to a Roth IRA, you have to pay the taxes on the money first.

Paying the Taxes

Many people consider paying for these taxes with money from the IRA. However, most investment professionals would advise against this. You are going to be eating into a large portion of your retirement funds by doing this. Instead, you should try to pay for the conversion with money out of your pocket. This is going to allow you to keep your retirement funds intact.

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