Roth Ira

Do you want to rollover your IRA to a Roth IRA? Before you do, you should know the fast about the Traditional IRA and the Roth IRA. You will also want to take special note to the rules of a IRA to Roth IRA rollover.

First let us discuss the differences between a Traditional IRA and a Roth IRA. A Traditional IRA is a tax-deductible retirement savings account. Like a 401k account, you contribute money to the account before your money is taxed. When you begin to take distributions, your distributions are taxed as income.

On the other hand, a Roth IRA is a tax-deferred retirement savings account. Unlike both the 401k account and the Traditional IRA, your money is taxed before you contribute to your Roth IRA. When you begin to take distributions, your distributions are not taxed. So if you feel that you will move up a tax bracket, or two, after you retire, then a rollover IRA to Roth IRA seems to be the best course of action for you.

Both the Traditional IRA and Roth IRA have the same income requirements. Individuals cannot make over $95,000 a year. If they make less then $95,000 a year then they can contribute up to the $3,000 limit. Joint tax filers cannot make over $160,000 a year. If they make less than $160,000 a year, then the joint filers can contribute up to $3,000 per individual.

If you are still interested in an IRA to Roth IRA rollover, there is still more to consider. In order to rollover your IRA to a Roth IRA, your adjusted gross income cannot be more than $100,000 (if you are a single filer, or married but filing separately). If your adjusted gross income is less than $100,000 then you can rollover your IRA to a Roth IRA.

When you rollover your IRA to a Roth IRA, you will have to pay income tax on the amount of the rollover. That is because when you contributed to your Traditional IRA, you did not pay income tax on that money. When you rollover to a Roth IRA, you will not pay income tax when you begin to pay distributions, that is why Uncle Sam make you pay tax on the rollover amount.

So you are probably still asking, "why rollover an IRA to a Roth IRA?" Well, the answer to that question lies with you and your future. If you think your tax bracket will change to a higher one, rolling over to Roth IRA is the way to go for you. That is because you will not pay taxes on the distributions. Otherwise, the choice of an IRA to Roth IRA rollover lies in the details that only you hold.