Converting a Traditional IRA to a Roth IRA allows you to move pre-tax retirement funds into a Roth account, where future qualified withdrawals are tax-free. You’ll pay income tax on the amount converted in the year of conversion, but you’ll avoid taxes later in retirement.
You have three main options to complete the conversion, depending on your financial institution:
Rollover Conversion
- You withdraw funds from your Traditional IRA.
- You must deposit them into a Roth IRA within 60 days.
- If not completed within 60 days, the IRS may treat it as a taxable distribution
Trustee-to-Trustee Transfer
- You instruct your financial institution to transfer funds directly from your Traditional IRA to your Roth IRA.
- This method helps avoid missing the 60-day deadline.
Same Trustee Transfer
- If both your Traditional and Roth IRAs are held at the same financial institution, you can request a direct internal transfer.
- This is often the most straightforward and fastest method.
Additional Notes for 2025:
- There are no income limits for conversions in 2025.
- You must report the conversion on Form 8606 to calculate the taxable portion.
- Converted funds are subject to a 5-year holding period to avoid early withdrawal penalties if you're under age 59½.