Q:

What is the Roth conversion rate?

A:

Quick Answer

The Roth conversion rate is the tax rate applied to funds distributed from a traditional individual retirement account that is being converted into a Roth IRA. Bankrate reports there are several factors to consider when deciding if a conversion from a traditional IRA to a Roth IRA is advantageous.

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Full Answer

These factors include the amount being converted, what proportion of the converted amount is nondeductible contributions, age of the account holder, age at retirement, the assumed rate of return, the current tax rate, the tax rate at retirement and the investment tax rate. There are instances when a Roth IRA conversion is both an advantage and a disadvantage. Bankrate provides a calculator that determines anticipated traditional IRA and Roth IRA values at retirement by accepting the data inputs listed above. Individuals then choose a strategy, either leaving funds in a traditional IRA or converting to a Roth IRA, which maximizes the amount of capital available at retirement.

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