A. Here are a few key benefits by converting your retirement accounts to Roth -
- Money in traditional 401(k) and IRA is subject to mandatory annual withdrawals after age 70.5. The larger your RMDs, the bigger your tax bills in retirement.
- Money is Roth IRA is exempt from RMDs, and when you withdraw money from Roth IRA, it will be tax-free.
- Money in Roth 401(k) can also avoid RMD if you roll it into a Roth IRA before you are 70.5, otherwise, there will be an RMD, but there will be no tax on it.
- Having access to tax-free money can help manage your tax bill in retirement, for example, whether you will owe tax on your social security benefits, how much your annual premium will be for Medicare Part B.
The only thing you need to be careful is every dollar you convert will be taxed as ordinary income in the year, you don't want your current year's income balloon to a higher tax bracket.