What is a Roth Conversion?
A Roth conversion is the process of transferring funds from a Traditional IRA to a Roth IRA. This allows you to take advantage of tax-free withdrawals in retirement, but it does come with tax implications in the year of the conversion.
Are there important details to know before converting to a Roth IRA?
Yes, here are some key points to consider before completing a Roth Conversion:
- Tax Implications:
The amount converted is considered taxable income in the year the conversion is completed. Ensure you plan for potential tax liabilities. - Conversion Timing:
Conversions are attributed to the calendar year they are completed. - Deposit Settlement:
If you’ve recently made a deposit into your Traditional IRA, you must wait until the deposit has settled to proceed. Attempting to convert funds before they settle will result in an error. - Form 1099-R:
After the conversion, you'll receive a Form 1099-R to include with your tax filing.
What are the steps to convert my Traditional IRA to a Roth IRA?
Follow these steps to complete a Roth conversion:
- Login to your Betterment account through a web browser.
- Navigate to the Conversion Option:
- From the left-hand menu, go to Settings > Accounts > Traditional IRA.
- Click on the option Convert IRA to Roth and follow the prompts.
What if I encounter issues during the Roth conversion process?
If you're having trouble completing a Roth conversion, here are some troubleshooting steps:
- Use a Web Browser:
The Roth conversion process is only supported on the web version of your Betterment account, not the mobile app. - Check Deposit Settlement:
- If you recently deposited funds into your Traditional IRA, ensure the deposit has fully settled before attempting the conversion.
- Attempting to convert funds before settlement will result in an error.
- You can verify the status of your deposit by navigating to Activity in the left-hand menu.
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