Ask Money

Shift to the Roth?

Chris Farrell Jun 10, 2011

Question: Dear Chris, My wife and I have been working in our careers for several years and have each had a job change in the past five years. Shortly after the job change we converted our old 401k’s into self-directed Fidelity IRA’s. Now I’m wondering if we should convert the IRAs into Roth IRAs to get the taxes out of the way while rates at their present levels? Any thoughts? Matt, Milwaukee, WI

Answer: It could be a good move. A quick litmus test: Do you have the savings elsewhere to pay the tax bill due on conversion? It usually doesn’t pay to switch if you have to use money from the IRA to pay the tax.

Now, let’s say you do have sufficient savings. There are still a number of imponderables to think through, so I would run the numbers. Check out the IRA-to-Roth calculator at Analyzenow.com, and see what you think.

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