How to Convert Traditional IRA to Roth IRA

Individual Retirement Accounts (IRA's) are a key element to retirement planning. Although traditional IRA owners have had their accounts for a number of years, conversion to the Roth IRA is gaining in popularity. The instructions below will help you to convert yours as well.

Things You'll Need

• Current traditional IRA

Instructions

1. Do research to learn the workings of a Roth IRA (see Resources below).

2. Contact your financial institution to request a distribution.

3. Convert the funds from your traditional IRA into the Roth IRA within 60 days. This is a good idea If you are leaving a job and want to take your money with you.

4. Decide whether you want to stay with your financial institution or have your money rolled over to another one. This will determine the direction to be given to transfer the money.

5. Report the conversion on IRS form 8606 (Nondeductible IRA's). A conversion causes any untaxed amounts in the Traditional IRA to now become taxable.

Tips & Warnings

• Save now for unexpected expenses during retirement.

• There is a penalty for early withdrawal.