Is now a good time to do a Roth conversion?

Answer:First, let’s make sure we’re on the same page about the basics of a Roth conversion: When you make this money move, you’re transferring money from a traditional IRA account (that’s not been taxed yet) into a Roth IRA account that will grow tax free moving forward.

You’ll owe ordinary income taxes on the amount you convert, so that brings us to our first question for you: Will you be able to pay this tax bill? If you don’t have the funds – or you would have to pull from the money you’re converting – it’s probably not the best time.

Second, what does your tax bracket situation look like? If you think you’ll be paying higher taxes in the future, then taking advantage of the historically low tax rates right now makes sense. If the opposite is true, you may want to reconsider. And third, what’s the state of your estate plan? Roth conversions can be especially useful if you would like to pass on tax-free money to heirs.

Here’s The Simply Money Point: Having access to tax-free funds can give you much more flexibility in retirement, so, the answer to your question is ‘yes:’ Generally speaking, because tax rates are at historic lows, it’s an opportune time to do a Roth conversion. But, at the end of the day, whether you should actually proceed depends on your personal circumstance.