Should I Roll My Retirement Account into a Roth IRA?

May 22, 2014 10:44:23 AM / by Jason Shaw



Choosing the right way to invest retirement funds is a complex task.  To make matters more difficult, what was the right investment at one time may no longer be the best choice as time passes and your circumstances change.  For this reason and more, it is always best to undertake investment planning with the advice of a knowledgeable professional.


Employer-sponsored retirement plans such as 401(k)s are great while you are working.  They often carry the added benefit of matched contributions from your employer, and you get a tax deduction when you contribute.  A traditional IRA also lets you deduct your contributions, making it a valued choice for many who do not have access to employer-sponsored plans.

Some savers choose to invest in a Roth IRA, either instead of or in addition to a traditional IRA or 401(k).  Roth contributions are not tax-deductible, but qualified withdrawals from a Roth are tax-free.  This makes them particularly attractive to those who believe that they will be in a higher tax bracket during retirement than at the time they are making contributions to the Roth.  Others do not contribute to a Roth because the money they have available to contribute is more beneficially used for matched and/or tax-deductible contributions or because they are simply ineligible to make Roth contributions due to their income (see table below).

Roth IRA Income Limits, 2023

For 2023, if you are married and filing jointly you can make a full contribution to a Roth IRA if you make less than $218,000 and it will phase out up to $228,000. For single and head of household, the income limit for a full Roth IRA contribution is $138,000 and phases out up to $153,000. 


Although who may directly contribute to a Roth IRA is limited by income, anyone, regardless of income level, may now roll over a traditional IRA or 401(k) to a Roth (This was not true prior to 2010).  To convert a 401(k), however, you may need to wait until you leave your job and/or reach the age of 59 ½.  Check the rules of your plan for specific restrictions.

The primary drawback of rolling your traditional IRA or 401(k) into a Roth is that you must pay income tax on the amount you convert.  Remember, you did not pay taxes on the income you contributed to the original account, so you do need to pay taxes when you take it out.  This cost, however, may be outweighed by the benefits you stand to gain by converting:

  • Once the money is in a Roth, it can continue to grow tax-free until you need it.
  • You can continue to make contributions to a Roth, regardless of your age, as long as you have income.
  • You can access Roth contributions at any time without penalty (although to access earnings, the account must be at least five years old, and you must be at least 59 ½, unless you qualify for an exception.
  • A Roth IRA gives you access to tax-free income in retirement; retirement income drawn from a traditional IRA or 401(k) is subject to tax.

Whether converting your traditional IRA or 401(k) funds to a Roth IRA is a wise financial move depends heavily upon your individual circumstances. It is important to make fully informed choices about how you invest your money.  Speak with a qualified financial planning professional to discuss the tax consequences that would be associated with moving your retirement funds.

Boelman Shaw Tax & Financial Planning provides comprehensive financial services, including tax, retirement planning, and more for our Des Moines area clients.  Give us a call to find out how we can help you make wise investment decisions for your retirement.

Tax and accounting services provided through Boelman Shaw & Company, LLC. Advisory services provided through BSC Capital Partners, LLC a state of Iowa registered investment advisor.

Topics: Retirement

Written by Jason Shaw