Who should consider converting to a Roth IRA?

You must pay income taxes on any converted funds in the year of the conversion, but there are several scenarios in which that might be to your advantage:

  • You believe your tax bracket will be higher in retirement.
    In this scenario, paying taxes at your current tax rate is preferable to paying a higher rate after you’ve stopped working. Paying higher taxes in retirement may sound farfetched, but it’s possible, especially if you haven’t yet hit your peak earning years or have accumulated significant savings in your retirement accounts. It could make sense to convert all or a portion of funds in a traditional IRA to a Roth today and not in the future.

  • You want to maximize your estate for your heirs.
    If you don’t need to tap your IRA funds during your lifetime, converting from a traditional to a Roth IRA allows your savings to grow undiminished by RMDs, potentially leaving more for your heirs, who can generally withdraw the money tax-free as long as they follow IRS distribution rules. 

  • Your accounts aren’t diversified by tax treatment.
    That is, most of your assets are in tax-deferred accounts. By converting to a Roth IRA, you’ll have assets that won’t be taxed when withdrawn, potentially allowing you to better manage your tax brackets and enable more personalized tax planning during retirement.

  • You have irregular income streams and lower-than-usual income this year.
    For example, you might own a business that generated a net operating loss from non-passive income. This could be the perfect opportunity to convert some funds to a Roth IRA with a relatively low tax impact.

    Still, have questions?
    Contact Pro Advisor Support to answer your questions.

    Clergy Financial Resources
    Tax I Payroll I Bookkeeping I HR
    11214 86th Avenue N.
    Maple Grove, MN 55369

    Tel: (888) 421.0101
    Fax: (888) 876.5101

<  Back

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com


If you would like to learn more about our tax services designed for clergy or payroll, bookkeeping or HR designed for churches, please complete the request form to have an advisor contact you.

Click Here