What is a Roth conversion? What is a Roth conversion?

What is a Roth conversion?

Contributor Contributor

A Roth Conversion is the process of moving a Traditional IRA, 401(k), 403(b) or other pretax accounts into a post-tax Roth IRA

When one converts a Traditional Retirement Account to a Roth IRA, a one-time taxable event* is created to make the conversion happen.  

Roth IRA Conversion Process:

  1. Funds need to be in a pretax IRA, most often a Traditional IRA, in order to be eligible for conversion
  2. If rolling over an employer plan like a 401k, 403b, TSP, or 457, the account gets rolled into a Traditional IRA first (See if your employer plan is eligible for rollover here) 
  3. When completing an iTrustCapital application, you will indicate that you currently have a Traditional Retirement Account, but would like to open a Roth IRA (this ensures that you receive the proper next steps)
  4. It is important to understand that this creates a taxable event* and you are responsible for reporting the Roth conversion to the IRS when filing income taxes for the following year - the amount converted will be added to your income for the calendar year in which the conversion is done
  5. Once converted, your account will continue to experience tax-deferred* growth as it did in your Traditional account, but because it's a Roth IRA, qualified distributions during retirement will be tax-free*

new contribution is another way to get your post-tax funds into a Roth IRA.
You can almost always make a contribution to a Roth IRA with new funds directly if you are eligible and under the income limits.


*Some taxes and conditions may apply. iTrust Capital, Inc. does not provide legal, investment, or tax advice. We recommend seeking the advice of a qualified legal, investment, or tax professional.